Why the profitability index is more appropriately described as a variation on the NPV technique than as

Question:

Why the profitability index is more appropriately described as a variation on the NPV technique than as a variation on the IRR technique?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Practical financial management

ISBN: 978-0324422634

5th Edition

Authors: William r. Lasher

See More Books

Question Posted: Sep 13, 2012 03:42 AM

See More Questions

The profitability index is a scale less attribute for measuring a projects benefits relative to the costs. How might this help to eliminate bias in project selection?
Briefly explain how the profitability index is calculated and interpreted.
The profitability index is a tool for measuring a projects benefits relative to its costs. How might this help to eliminate bias in project selection?
In Exercises 35 through 42, the slope f'(x) at each point (x, y) on a curve y = f(x) is given along with a particular point (a, b) on the curve. Use this information to find f(x). f'(x) = 3x 2 + 6x ...
Use the sign lest and the signed rank test to analyze the paired data set of calculus scores given in DS 9.2.4. Do you find any evidence of a difference between the two teaching methods? How much...
Spencer is the owner of Island Art, a retail establishment in the beach community of Stone Harbor, New Jersey. He would like to develop a probability model to predict the number of customers who...
P3-5 Prepare a consolidated balance sheet one year after acquisition On January 1, 2016, Mignonne Corporation paid $2,850,000 in cash for a 100 percent interest in Petite Corporation when Petites...
In the drawing below you can see a cut through a bevel gear box. The torque from the drive side (1) is transmitted with the bevel gear (2) to the outcome side (3). The drawing has some design flaws...
The trial balance of ABC Corporation shows a balance in Prepaid Insurance of $3,600 at Dec 31. The Insurance was purchased on March 31st and covers until March 31st next year. Prepare the adjusting...
A company has a long position in a two-year bond and a three-year bond as well as a short position in a five-year bond. Each bond has a principal of $100 and pays a 5% coupon annually. Calculate the...
Under what conditions will the IRR and NPV methods give conflicting results for mutually exclusive decisions? Will they ever give conflicting results for standalone decisions? Why?
Show that the profitability index (PI), the initial outlay (C0), and the net present value (NPV) of a project are related by the following equation. NPV = C0(1 - PI)
Think about some occasions at work when you have tried to achieve something that you wanted. To what extent were push or pull strategies used? Were the strategies successful? If so, why do you think...
In the circuit of Fig. 4-51 write two loop equations using I 1 and I 2 . Then find the currents and node voltages. A 3A ( 4 3 V 792 B +1 D w 392 12 C
The capacitor in the circuit shown in Fig. 7-37 has initial charge Q 0 = 800 C, with polarity as indicated. If the switch is closed at t = 0, obtain the current and charge, for t > 0. 100 V (+ 10 4 F
A gift shop sells 400 boxes of scented candles a year. The ordering cost is $$60$ for scented candles, and holding cost is $$24$ per box per year. What is the economic order size for scented...
Kay Vickery is angry with Gene Libby. He is behind schedule developing supporting material for tomorrows capital budget committee meeting. When she approached him about his apparent lackadaisical...
Tharpe Painting Company is considering whether to purchase a new spray paint machine that costs $$3,000$ . The machine is expected to save labor, increasing net income by $$450$ per year. The...
Preparing a cost of production report when there are lost units. The Lakeside Company uses a process cost accounting system. On May Il 19X8, the company had 600 units in production in the Assembly...
A fuel pump sends gasoline from a car's fuel tank to the engine at a rate of 5.88 10-2 kg/s. The density of the gasoline is 735 kg/m3, and the radius of the fuel line is 3.18 10-3 m. What is the...
The following extract shows the costs of using water in the home. Questions 1 What kinds of variable cost might be included in these cost estimates? 2 What kinds of fixed costs might be used in the...
Refer to the information for Rowan Company in Problem 19.23. The firms management desires a sustainable growth rate (SGR) of 10 percent but does not wish to change the companys level of debt or its...
Rocky Sales, Inc., has current sales of $1,215,326 and net income of $211,253. It also has a debt ratio of 25 percent and a dividend payout ratio of 75 percent. The companys total assets are...
Ellicott Textile Mills management has reported the following financial information for the year ended September 30, 2011. The company generated a net income of $915,366 on a net profit margin of 6.4...
The major justification for adding Step 0 to the U.S. GAAP impairment test for goodwill and indefinite lived intangibles is that it: A. Saves money spent estimating fair values B. Results in more...
Regarding research and experimental expenditures, which of the following are not qualified expenditures? 3 a. costs of ordinary testing of materials b. costs to develop a plant process c. costs of...
Port Ormond Carpet Company manufactures carpets. Fiber is placed in process in the Spinning Department, where it is spun into yarn. The output of the Spinning Department is transferred to the Tufting...

Why the profitability index is more appropriately described as a variation on the NPV technique than as

Question:

Step by Step Answer:

The PI separates a projects NPV at a particular co...View the full answer

Practical financial management

Students also viewed these Corporate Finance questions