Thecorrectway to solve this problem would be to choose the projects starting from the highest profitability index until cash is depleted: Projects B, A, F, E, and D. This would yield an NPV of $545,000. Disadvantages of the Profitability Index The profitability index requires an estimate of...
Investors and financial analysts often rely on the profitability index (PI) to determine whether the benefits of an investment opportunity outweigh its costs. Essentially, the PI compares projected cash flows to the initial investment required. A PI grea
Answer to: Describe how the profitability index approach may be used by a firm faced with a capital rationing investment funds constraint. By...
How Early Profitability Index Can Predict Bank Failure: Evidence from U.S. Bank Failure during 2008-2010Samad, AbdusJournal of the Utah Academy of Sciences, Arts & Letters
Profit margins vary from industry to industry. A “good” profit margin for one company may be considered “bad” for another. Your average profit margin depends on a few different factors. Some of these factors include the number of employees you have, business location, type of business, si...
How to Adjust Year-Over-Year Growth for Inflation, Seasonality, and Volatility Inflation-Adjusted YoY Growth Inflation can distort growth figures. A company’s revenue may grow, but if inflation rises at the same rate, real growth is zero. To adjust, use an inflation index (e.g., CPI) to...
The resulting percentage can be used to compare the profitability of different investments and to determine which investment offers the highest return. Here are the detailed steps to calculate ROI: Determine the cost of the investment: This represents the entire cost of the investment, including all...
Most businesses use a common formula to determine their revenue. Regardless of the technique, businesses frequently report net revenue instead of gross sales (which removes things like discounts andrefunds). By dividing the sum of the number of sales by the selling price, we can compute the reve...
You compute the value of the penalty by multiplying the replacement cost ($500,000) with the multiplier, 0.25 (1 – 0.75). So by violating the coinsurance clause, you are not only unable to receive the full replacement cost, but you also have to pay a hefty penalty. ...
One of the good ways of doing this is narrowing down your niche. For example, you can opt to deal with a specific SEO industry based on your expertise or where you see potential profitability opportunities. If maybe you are good at technical SEO, you can make that specialty clear on your...