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Profitability index

This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

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February 10, 2021 at 12:00 am #609872
student999
Participant
- Topics: 6
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Hi
For example, a company invested 5m in machine and 1m in WC. NPV is 2m. How to then calculate Profitability index, do we include the WC investment or ?
PI = NPV/Initial investment
2m/5
0.4
OR
PI = 2m/6m
0.33
February 10, 2021 at 9:42 am #609897
John Moffat
Keymaster
- Topics: 57
- Replies: 54820
Subject to anything else that might be written in the question, we do include the working capital.
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