Asked by Shelia Marcano on Jun 15, 2024
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A positive profitability index indicates a positive net present value.
Profitability Index
A financial tool that calculates the ratio between the present value of cash inflows and the present value of initial investment, often used in capital budgeting.
Net Present Value
The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.
- Understand the method of net present value and its significance in the process of capital budgeting.
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Learning Objectives
- Understand the method of net present value and its significance in the process of capital budgeting.
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