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Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio (VIR), is the ratio of payoff to investment of a proposed project. It is a useful tool for ranking projects because it allows you to quantify the amount of value created per unit of investment. Under capital rationing, PI method is suitable because ...
The Profitability Index (PI) measures the ratio between the present value of future cash flows and 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).
Jan 7, 2024 · The profitability index (PI) is a financial metric used to assess the potential profitability of an investment or project. It's calculated by dividing the present value of future cash flows by the initial investment cost. PI serves as an essential tool for making informed investment decisions.
Apr 15, 2024 · Profitability Index (PI) shows the relationship between company projects future cash flows and initial investment by calculating the ratio and analyzing the project viability and it is calculated by one plus dividing the present value of cash flows by initial investment and it is also known as profit investment ratio as it analyses the profit of...
The Profitability Index (PI), also known as the profit investment ratio (PIR) or value investment ratio (VIR), is a financial metric that calculates a project’s potential profitability by comparing its present value of future cash flows to its initial investment cost. It serves as a tool for ranking the attractiveness of investment projects.
The Profitability Index, also known as the Profit Investment Ratio (PIR) or Value Investment Ratio (VIR), is a capital budgeting tool used to measure the relative profitability of an investment. It is the ratio of the present value of future cash flows generated by a project to the initial investment made.
Apr 21, 2021 · TL; DR. The Profitability Index formula is: Where is the Profitability Index, is the Net Present Value, and reflects the initial investment (aka cash outflow). This is our recommended formula, too. Importantly, there is an alternative expression for the Profitability Index formula. We can also write it like this… Here reflects the Present Value .
