23 Oct 2016 The profitability index helps make it possible to directly compare the NPV of one project to the NPV of another to find the project that offers the This free tool helps you calculate the profitability index (PI) or profit investment ratio (PIR) based on the amount of your investment, the discount rate, and the 24 Jul 2013 Use the Profitability Index Method Formula and a discount rate of 12% to determine if this is a good project to undertake. Profitability index shows the relationship between company projects future cash flows and initial investment by calculating the ratio and analyzing the project
This free tool helps you calculate the profitability index (PI) or profit investment ratio (PIR) based on the amount of your investment, the discount rate, and the 24 Jul 2013 Use the Profitability Index Method Formula and a discount rate of 12% to determine if this is a good project to undertake.
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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. To do this on the HP 10BII, first clear all prior work, and then use the following steps: Input 10,000 and press the FV key. Input 10 and press the N key. Input 6.5% and press the I/YR key. Input 0 and press the PMT key. Press the PV key to solve for the present value. HP 10bII+ Financial Calculator Choose a different product series Warranty status: Unspecified - Check warranty status Manufacturer warranty has expired - See details Covered under Manufacturer warranty Covered under Extended warranty , months remaining month remaining days remaining day remaining - See details The Modified Internal Rate of Return (MIRR) is sometimes offered, particularly in the real estate profession, as a way to recognize imperfect capital markets, in which reinvestment rates and requirements of liquidity limit the more stringent assumptions of IRR and NPV. TI BA II Plus How To Calculate The Profitability Index - Duration: 2:54. Calculator Expert 41,788 views. Three basics on HP 10bII Financial Calculator - Duration: 7:53. Travis Buhler 82,065 By using the NPV method, we would now calculate profitability index (PI) – Profitability Index Formula = 1 + NPV / Initial Investment Required; PI = 1 + 1277.63 / 5000; PI = 1 + 0.26; PI = 1.26; From the above computation, we can come to the conclusion that ABC Company should invest in the project as PI is more than 1. Limitations
The formula for the Profitability Index can be calculated by using the following steps: Step #1: Firstly, the initial investment in a project has to be assessed based on the project requirement in terms of capital expenditure for machinery & equipment and other expenses which are also capital in nature.