A.profitability index less than 1.0B.project's internal rate of return less than the required returnC.discounted payback period greater than requirementD.modified internal rate of return that exceeds the require
If the PI is less than 1, the project destroys value and the company should not proceed with the project. If the PI is equal to 1, the project breaks even and the company is indifferent between proceeding or not proceeding with the project. The higher the profitability index, the more at...
= [ 909.09 + 1652.89 + 3005.26 ] / 10000 = [ 5567.24 ] / 10000 The profitability index for this project is 0.5567 The project should be rejected since its PI is less than 1Facebook Twitter Currently 4.69/5 1 2 3 4 5 Rating: 4.7/5 (562 votes) Top...
The profitability index is calculated by dividing the present value of future cash flows that will be generated by the project by the initial cost of the project. A profitability index of 1 indicates that the project will break even. If it is less than 1, the costs outweigh the benefits. ...
Profitability index formula: If the index is higher than 1, it’s a green light. The project is likely to generate more money than its cost. If the index is less than 1, the project might not cover its initial costs, so either shelve the project or rework its budget and/or scope. ...
profitability Thesaurus Financial Encyclopedia Wikipedia Related to profitability:Profitability index prof·it·a·ble (prŏf′ĭ-tə-bəl) adj. Yielding profit; advantageous:an investment that was barely profitable. prof′it·a·bil′i·ty,prof′it·a·ble·nessn. ...
A project with a profitability index of greater than 1 is assumed to have the potential to increase the wealth of the company and hence should be accepted. When the PI is less than one, the project should be rejected.Answer...
However, both PIs are less than 1.0, so the company may forgo either project. What Are the Advantages of the PI? The profitability index considers the time value of money, allows companies to compare projects with different lifespans, and helps companies with capital constraints choose investments...
Profitability index (PV) = (84.197,32 / 85,000) = 0.991 making it a slightly losing investment. As a general rule: If the result is greater than 1, the project will generate value and the organization should proceed with the project. If the result is less than 1, the project destroys...
Profitability Index = Present Value of Future Cash Flows / Initial Investment This shows you how much money you can expect to earn in relation to each dollar you’ve invested. Ideally, the index will be higher than 1 for the project to be profitable. If the index is under 1, this means...