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The present value of future cash flows, initial investment, net present value, and profitability index for each of the projects are as follows profitability index.
Profitability index, also called the profit ienvestmnt ratio and value investment ratio, is the ratio of payment to investment of a proposed project. It is a useful tool for ranking projects as it allows you to quantify the amount of value created per unit of investment.
The Profitability Index (PI) is a measure of the attractiveness of a project or investment. PI is calculated by dividing the present value of expected future cash flows by the initial investment of the project.
Profitability is measured by income and expenses. Income is the money generated by a company's activities. For example, if you produce and sell crops or livestock, income will be generated. However, the money that flows into the business, such as borrowing money, is not income.
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