A cost-benefit ratio is also called a profitability index. Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved. Want to Pros: 1. Closely related to The Profitability Index (PI). 244. □ What: The profitability index is the present value of an investment's future cash flows divided by its Advantageous Closely related to NPV leading to identical decisions Easy to 28 Profitability Index The present value of an investment's future value cash flows The profitability index for each project is: A: PI = ($55,000 / 1.16 + $75,000 / 1.162 + $75,000 / 1.163 + $450,000 / 1.164) / $340,000 = 1.176 B: PI = ($25,000 / 1.16 + $23,000 / 1.162 + $20,500 / 1.163 + $15,600 / 1.164) / $51,500 = 1.173 The profitability index criterion implies we accept Project A because its PI is greater than Project B's. f. The Profitability index is closely related to Net present value. When the Net present value of the project is positive, then the profitability index is greater than 1.00. And for the project having negative net present value, the profitability index of respective project lies within 1.00.
Advantageous Closely related to NPV leading to identical decisions Easy to 28 Profitability Index The present value of an investment's future value cash flows The profitability index for each project is: A: PI = ($55,000 / 1.16 + $75,000 / 1.162 + $75,000 / 1.163 + $450,000 / 1.164) / $340,000 = 1.176 B: PI = ($25,000 / 1.16 + $23,000 / 1.162 + $20,500 / 1.163 + $15,600 / 1.164) / $51,500 = 1.173 The profitability index criterion implies we accept Project A because its PI is greater than Project B's. f.
It estimates that the expected future after-tax cash flows associated with this 47) If the NPV of a project is greater than zero, then its profitability index is Net present value; Internal rate of return; Payback period; Profitability index is determined by the financial managers of the firm and is related to the amount of being financed as closely as possible, in terms of both timing and cash flows. Consequently, a sensitivity analysis of some profitability indices such as the net Two scenarios have been considered that closely resemble two top PV as a guidance or explaining some scenarios related to these solar energy systems. 8 Apr 2018 That means that you're not doing as well as the specified rate of return. A term closely related to NPV is profitability index explained in a separate Is Tesla Close to Bankruptcy? Myths Surrounding Toys R Us Bankruptcy · The Economics of 'Soda Taxes' · Why Elon Musk's Tesla Should Go Private and Why It The profitability index is related closely to net present value. The NPV is the difference between the present value of future cash flows and the initial cash outlay, A cost-benefit ratio is also called a profitability index. Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved. Want to
8 Apr 2018 That means that you're not doing as well as the specified rate of return. A term closely related to NPV is profitability index explained in a separate Is Tesla Close to Bankruptcy? Myths Surrounding Toys R Us Bankruptcy · The Economics of 'Soda Taxes' · Why Elon Musk's Tesla Should Go Private and Why It
Discounted payback 29.5% Accounting rate of return 30.3% Profitability index 11.9% *IRR: Still widely used since it is closely related to NPV and easy to the profitability index is most closely related to which one of the following? net present value. rogers meat market is considering two independent projects. the The Profitability Index (PI) measures the ratio between the present value of future cash flows to the initial investment. The index is a useful tool for ranking It could be much more profitable putting the planned investment money in the bank and earning interest, or investing in an alternative project. NPV and IRR methods are closely related because: i) both are The profitability index - PI.