profitability index/profitability index formula
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Profitability index is an investment
Profitability index is an investment appraisal technique calculated by dividing the present value of future cash flows of a project by the initial investment required for the project.
Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio (VIR), cost-benefit ratio or benefit-cost ratio.
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Profitability index is used the time value of the money concepts in its calculation. Profitability index ratio is calculated, the present value of the future cash flows, divided by initial investment for the project. Different formulas are used for Profitability index calculation. The result of all formulas must be the same. You may use any one formula, selection of the formula depends on your requirement and available data of the projects.
Profitability index formula
Profitability index equal the present value of future cash flows divided by the initial investment.
How to calculate profitability index?
You may use Excel or calculator or present value table.
The Advantages of Profitability Index are given below.
1. Profitability index considers the time value of money.
2. Profitability index considers the analysis of all cash flows of the entire life.
3. Profitability index makes the right in the case of the different amount of cash outlay of different project.
4. Profitability index ascertains the exact rate of return of the project.
The disadvantages Of Profitability Index are as follows:
1. It is difficult to understand the interest rate or discount rate.
2. It is difficult to calculate profitability index if two projects having a different useful life.
https://en.wikipedia.org/wiki/Profita...
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Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio (VIR), cost-benefit ratio or benefit-cost ratio.
To like us on Facebook, visit Facebook: accountingPlusS
Subscriber: accountingplus
Here is a link: https://home-work-help.blogspot.com/
Profitability index is used the time value of the money concepts in its calculation. Profitability index ratio is calculated, the present value of the future cash flows, divided by initial investment for the project. Different formulas are used for Profitability index calculation. The result of all formulas must be the same. You may use any one formula, selection of the formula depends on your requirement and available data of the projects.
Profitability index formula
Profitability index equal the present value of future cash flows divided by the initial investment.
How to calculate profitability index?
You may use Excel or calculator or present value table.
The Advantages of Profitability Index are given below.
1. Profitability index considers the time value of money.
2. Profitability index considers the analysis of all cash flows of the entire life.
3. Profitability index makes the right in the case of the different amount of cash outlay of different project.
4. Profitability index ascertains the exact rate of return of the project.
The disadvantages Of Profitability Index are as follows:
1. It is difficult to understand the interest rate or discount rate.
2. It is difficult to calculate profitability index if two projects having a different useful life.
https://en.wikipedia.org/wiki/Profita...
http://accountinghw.com/
8 سال پیش
در تاریخ 1395/11/01 منتشر شده
است.
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