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The profitability index (PI) is an appraisal technique applied to potential capital outlays (Investopedia, 2019). The PI further takes into consideration time value of money
The profitability index (PI) is an appraisal technique applied to potential capital outlays (Investopedia, 2019). The PI further takes into consideration time value of money thus making it a useful and easy appraisal technique to apply in practice 1.1 The following information is available for a construction company based in South Africa. Assess the viability of the projects and rank them accordingly using the profitability index. Show correctly the formula used Project Cost (Rands) NPV (Rands) Gauteng Free state Western Cape KZN Limpopo Northern Cape 1380 000 1600 000 500 000 2700 000 900 000 700 000 500 000 420 000 40 000 540 000 220 000 (85 000) Cost of Capital 16% Discuss the Net Present Value and Profitability Index methods. Include in your discussion the drawbacks of each method
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