Question

When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. if the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a(n):?

Answer 1

By using a present value index. The profitability index is computed by partitioning the present estimation of the venture's future money streams by the underlying speculation. A PI more prominent than 1.0 demonstrates that gainfulness is certain, while a PI of under 1.0 shows that the venture will lose cash.