Profitability Index
Definition
What is Profitability Index?
Present valueThe current worth of money expected in the future after applying a discount rate. of future cash inflows divided by the initial investmentAn asset or commitment of money made with the expectation of future income, growth, or both..
Example in practice
How This Looks in Practice
A project with ₦120 million present value and ₦100 million cost has a 1.2 profitability index.
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Related Terms
Net Present Value
Present value of expected cash inflows minus present value of expected cash outflows.
Capital BudgetingInternal Rate of Return
The discount rate that makes a project's net present value equal to zero.
Capital BudgetingModified Internal Rate of Return
A return measure that uses specified financing and reinvestment rates rather than assuming reinvestment at the IRR.
Company DisclosuresAnnual Report
A yearly publication containing financial statements, management discussion, governance information, and other disclosures.