Weba.Project Alpha Profitability index is calculated using the below formula: Profitability Index= NPV + Initial investment/ Initial investment Net present value can be solved using … WebNov 29, 2024 · Following is the basic equation for calculating the present value of cash flows, NPV (p), when cash flows differ each period: NPV (p) = CF (0) + CF (1)/ (1 + i)t + CF (2)/ (1 + i)t + CF (3)/ (1 + i)t + CF (4)/ (1 + i)t Where: i = firm's cost of capital t = the year in which the cash flow is received CF (0) = initial investment

Profitability Index Method: Definition & Calculations

WebYear Cash Flow 0 −$ 14,800 1 8,400 2 7,600 3 4,300 a. What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index for the set of cash flows if the relevant discount ... WebCalculate Profitability Index to prove that. PI = Present Value of Future Cash Flow / Initial Investment Required; PI = US $130 million / US $100 million; PI = 1.3; We will use … landroverman taunton

Solved Year Cash Flow 0 −$ 14,800 1 8,400 2 7,600 3 4,300 ... - Chegg

WebProfitability index is a modification of the net present value method of assessing an investment's potential profitability. PI ratio compares the present value of future cash … WebDec 12, 2015 · Profitability index = present value of future cash flows / initial investment. We calculated that the net present value of all of the lemonade stand's cash flows was … WebJun 24, 2024 · The profitability index is the ratio between the present value of all future cash flows and the initial cash outflow of the investment. If the ratio is greater than 1, then according to the PI method, the company … land rover manalapan