## Based on the profitability index rule

Based on the profitability index rule, should a project with the following cash flows be accepted if the discount rate is 14 percent? Why or why not? 3.21 years. You are considering a project with an initial cost of $7,500. What is the payback period for this project if the cash inflows are $1,100, $1,640, $3,800, and $4,500 a year over the e-1 What is the profitability index for each project? e-2 If you apply the profitability index criterion, which investment will you choose? f. Based on your answers in (a) through (e), which project will you finally choose? a. Based on the profitability index rule, should the project be accepted if the discount rate is 14 percent? Why or 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 investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) or the Value Investment Ratio (VIR). If the profitability index is greater than or equal to 1, it is termed a good and acceptable investment. The calculator given below helps in the calculation of the PI or PIR based on the amount of investment, discount rate, and the number of years. See Also: Profitability Index Method. Profitability Index Method Formula. Use the following formula where PV = the present value of the future cash flows in question.. Profitability Index = (PV of future cash flows) ÷ Initial investment. Or = (NPV + Initial investment) ÷ Initial Investment: As one would expect, the NPV stands for the Net Present Value of the initial investment. 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 investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) or the Value Investment Ratio (VIR).

## 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 investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) or the Value Investment Ratio (VIR).

Based on the profitability index (PI) rule, should a project with the following cash flows be accepted if the discount rate is 8%? Why or why not? The profitability index is a technique used to measure a proposed project's costs and benefits by dividing the projected capital inflow by the investment. Based on the profitability index rule, should a project with the following cash flows be accepted if the discount rate is 14 percent? Why or why not? 3.21 years. You are considering a project with an initial cost of $7,500. What is the payback period for this project if the cash inflows are $1,100, $1,640, $3,800, and $4,500 a year over the e-1 What is the profitability index for each project? e-2 If you apply the profitability index criterion, which investment will you choose? f. Based on your answers in (a) through (e), which project will you finally choose? a. Based on the profitability index rule, should the project be accepted if the discount rate is 14 percent? Why or 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 investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) or the Value Investment Ratio (VIR). If the profitability index is greater than or equal to 1, it is termed a good and acceptable investment. The calculator given below helps in the calculation of the PI or PIR based on the amount of investment, discount rate, and the number of years. See Also: Profitability Index Method. Profitability Index Method Formula. Use the following formula where PV = the present value of the future cash flows in question.. Profitability Index = (PV of future cash flows) ÷ Initial investment. Or = (NPV + Initial investment) ÷ Initial Investment: As one would expect, the NPV stands for the Net Present Value of the initial investment.

### 17 Jan 2017 Depending on their profitability and availability of funds, the company can undertake both Decision Rule: If NPV is positive, ACCEPT.

See Also: Profitability Index Method. Profitability Index Method Formula. Use the following formula where PV = the present value of the future cash flows in question.. Profitability Index = (PV of future cash flows) ÷ Initial investment. Or = (NPV + Initial investment) ÷ Initial Investment: As one would expect, the NPV stands for the Net Present Value of the initial investment. 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 investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) or the Value Investment Ratio (VIR). Based on the profitability index rule, should a project with the following cash flows be accepted if the discount rate is 14 percent? Why or why not? Based on the data submitted for this specific rental income property, the 1.2257 profitability index computed indicates that this real estate investment will exceed your desired goal of a 10% rate of return. Rule of Thumb Based on the profitability index rule, should a project with the following cash flows be accepted if the discount rate is 14 percent? Why or why not? Year Cash Flow 0 -26,200 1 11,800 2 0 3 24,900 Answer a. No The PI is 0.96. b. Yes The PI is 1.08 c. Yes The PI … Continue reading (Solved) Based on the profitability index rule, should a project with the following cash flows be accepted if

### Rate of Return Rule - Invest in any project offering a based on highest NPV. assume 7% Profitability index is routinely computed by about 12 % of firms.

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 investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) or the Value Investment Ratio (VIR). Based on the profitability index rule, should a project with the following cash flows be accepted if the discount rate is 14 percent? Why or why not? Based on the data submitted for this specific rental income property, the 1.2257 profitability index computed indicates that this real estate investment will exceed your desired goal of a 10% rate of return. Rule of Thumb Based on the profitability index rule, should a project with the following cash flows be accepted if the discount rate is 14 percent? Why or why not? Year Cash Flow 0 -26,200 1 11,800 2 0 3 24,900 Answer a. No The PI is 0.96. b. Yes The PI is 1.08 c. Yes The PI … Continue reading (Solved) Based on the profitability index rule, should a project with the following cash flows be accepted if Decision Rule. The breakeven value of a ratio is equal to 1. If a project has a profitability index greater than 1, it should be accepted; if lower than 1, it should be rejected. The value of 1 is the point of indifference regarding whether to accept or reject the project. Based on the profitability index rule should a project with the following cash from FINANCE HRM 401 at Institute of Business Administration See Also: Profitability Index Method. Profitability Index Method Formula. Use the following formula where PV = the present value of the future cash flows in question.. Profitability Index = (PV of future cash flows) ÷ Initial investment. Or = (NPV + Initial investment) ÷ Initial Investment: As one would expect, the NPV stands for the Net Present Value of the initial investment.

## Answer to Based on the profitability index (PI) rule, should a project with the following cash flows be accepted if the discount r

Rate of Return Rule - Invest in any project offering a based on highest NPV. assume 7% Profitability index is routinely computed by about 12 % of firms. Concept Of Profitability Index(PI), Its Calculation And Decision Rules return per dollar invested, while the NPV is based on the difference between the present

A profitability index of .85 for a project means that: the present value of benefits is 85% greater than the project's costs. the project's NPV is greater than zero. The NPV decision rule is to accept a project whose NPV is greater than Like the NPV method, the profitability index (PI) considers all cash flows, the timing of Based on the NPV, the firm should choose Project C with an NPV of $20,000. This factor would not be reflected in a discount rate based on the 'market' rate of interest. Finally, the method is The profitability index is defined as PI = -PV/C0. Rate of Return Rule - Invest in any project offering a based on highest NPV. assume 7% Profitability index is routinely computed by about 12 % of firms.