- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
Simple question, but do we include working capital in the calculation of Profitability Index ratio?
For example if 2m invested in a machine, 500k in working capital immediately with it being returned at the end. NPV is 400k.
Would the P.I = 400k/2000k (or if you prefer 2400k/2000k) <– W.C not included
Or would the P.I = 400k/2500k (2900k/2500k) <– W.C included
Also, if we are to include W.C in the Profitability Index, do we then include it as part of any calculations pertaining to divisible rationing?
i.e if 6m is available for projects, and we wanted to include 100% of the project above, would we cost it at 2m or 2.5m?
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.