WebFeb 6, 2024 · By Sam Swenson, CFA, CPA – Updated Feb 6, 2024 at 2:35PM. Net present value (NPV) is a number investors calculate to determine the profitability of a proposed project. NPV can be very useful for ... WebMar 13, 2024 · The profitability index is similar to calculating the net present value (NPV), with some differences. The main difference between these two methods is that PI is presented as a ratio so that it will not directly indicate the size of the cash flow. The calculation of NPV is carried out in several steps.
NPV vs IRR vs PB vs PI vs ARR - eFinanceManagement
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 $34.20. However, to calculate ... WebTo calculate the PI, we need to calculate the NPV: When discount rate = 10% Year CF Discount Factor Discounted CF 0 $ -29,500.00 1/ (1+0.1)^0= 1 1*-29500= $ -29,500.00 1 $ 16,900.0 … View the full answer Transcribed image text: gold perms
Solved Year Cash Flow 0 −$ 14,800 1 8,400 2 7,600 3 4,300 ... - Chegg
WebQuestion: Calculating Profitability Index What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is … The formula for the PI is as follows: or Therefore: 1. If the PI is greater than 1, the project generates value and the company may want to proceed with the project. 2. If the PI is less than 1, the project destroys value and the company should not proceed with the project. 3. If the PI is equal to 1, the project breaks even … See more Company A is considering two projects: Project A requires an initial investment of $1,500,000 to yield estimated annual cash flowsof: 1. $150,000 in Year 1 2. $300,000 in Year 2 3. $500,000 in Year 3 4. $200,000 in Year 4 … See more Thank you for reading this CFI guide. To continue learning, you may find the CFI resources listed below helpful: 1. Adjusted Present Value 2. Discounted Cash Flow (DCF) Formula 3. Profitability Ratios 4. Valuation Methods 5. … See more WebYear Cash Flow 0 −$ 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 ... gold per kg price