Profitability index (pi), Financial Management

Assignment Help:

Profitability Index (PI) :

It is a ratio of the present value of the total cash benefits to the present value of the net cash outlay.  The higher the PI, the higher the return. Any project with a PI higher than ONE is acceptable since profits exceed outlay. Projects with PI less than ONE are rejected.

Advantages:

  • It places the present value of every investment project on a relative basis so that projects of dissimilar sizes of capital outlays can be compared.

Related Discussions:- Profitability index (pi)

Which type of insurance company generally takes risks, Which type of insura...

Which type of insurance company generally takes on the greater risks: a life insurance company or a property and casualty insurance company? The risks protected against by cas

What are the techniques of financial management, What are the techniques of...

What are the techniques of financial management There are two widely-discussed techniques: (i) Profit maximisation approach and (ii) Wealth maximisation approach.

Defien contractual savings institutions, Contractual savings institutions ...

Contractual savings institutions Contractual savings institutions obtain funds at periodic intervals on a contractual basis. The industry is classified into two main groups ins

Illustrate modern method of measurements, Q. Illustrate Modern Method of Me...

Q. Illustrate Modern Method of Measurements? Holding Period Yield: The holding period yield is one of the modern techniques on Measuring return. It serves two purposes: a) I

Specific cost of capital, Specific Cost of Capital When the Cost of ev...

Specific Cost of Capital When the Cost of every source of capital is individually calculated, it is known as Specific Cost of Capital example Cost of equity, cost of debt, etc

Calculation of weighted average cost of capital, Calculation of Weighted Av...

Calculation of Weighted Average Cost of Capital The calculation of weighted cost of capital involves the following steps: (i) Calculate the cost of each source of funds.

What are the functions of financial management, Functions of Financial Mana...

Functions of Financial Management Traditional function of financial management has been limiting the role of finance toraising and administrating of funds required by the compa

Research and development and marketing costs, a) Product orientated busines...

a) Product orientated businesses tend to be produce products and inward looking that they hope will sell in the marketplace. For example, Sony hoped that its $101,500 audio systems

Certified public accountant, Certified Public Accountant (CPA) - ACCOUNTANT...

Certified Public Accountant (CPA) - ACCOUNTANT who has satisfied education, experience and examination requirements of her or his jurisdiction essential to be certified as a public

Explain arbitrage risk free arguments, The current market value of any real...

The current market value of any real or financial assets is the present value of the cash flows accruing to that asset discounted by a market determined risk-adjusted required rate

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd