Difference between revisions of "Profitability Index"

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Profitability Index
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The ''''Profitabilty Index''''' looks at the ratio of the NPV compared to the initial investment required:
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<math>{Profitability Index}</math> = <math>\frac{NPV}</math>{{Initial\ Investment}}<math></math>
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Compare the following projects:
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{| class="wikitable"
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!Project
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!<math>C_0</math>
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!<math>C_1</math>
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!<math>C_2</math>
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!NPV at 10%
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|-
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|A
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|-10
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|+30
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|+5
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|21
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|-
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|B
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|-5
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|+5
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|+20
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|16
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|-
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|C
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|-5
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|+5
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|+15
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|12
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|-
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|}
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The profitability index would be:
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{| class="wikitable"
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!Project
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!Investment
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!NPV
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!Profitability Index
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|-
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|A
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|10
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|21
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|2.1
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|-
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|B
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|5
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|16
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|3.2
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|-
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|C
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|5
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|12
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|2.4
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|-
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|}
 
[[Category:finance]]
 
[[Category:finance]]
  

Latest revision as of 19:25, 27 August 2020

The 'Profitabilty Index looks at the ratio of the NPV compared to the initial investment required:

= Failed to parse (syntax error): {\displaystyle \frac{NPV}} Template:Initial\ Investment

Compare the following projects:

Project NPV at 10%
A
30 5
21
B
5 20
16
C
5 15
12

The profitability index would be:

Project Investment NPV Profitability Index
A 10 21 2.1
B 5 16 3.2
C 5 12 2.4
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