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NPV vs. PI (Conflicts b/w NPV and PI results) (in Hindi)
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Heena Malhotra
Believe in Conceptual Learning.

Akash Modak
3 months ago
Ha ogulo o Complete kora hobe (one by one) Stay tunned ☺️
Tanushri Rajak
3 months ago
icds English completed??
Akash Modak
3 months ago
Ha
1. Capital Budgeting Decisions By Heena Malhotra

2. Payback Period Traditional or Non Discounting ccounting Rat of Return (ARR) Capital Budgeting Techniques Net Present Value (NPV) Profitability Index (PI) Time adjusted or Discounted Cash Flows Internal Rate of Return (IRR) Modified Internal Rate of Return (MIRR) Discounted Payback By Heena Malhotra

3. NPV PVC1 - PVCo By Heena Malhotra

4. Profitability Index/Desirability Factor/Present Value Index Method (PI) PVC PV Co Pl By Heena Malhotra

5. Suppose we have three projects involving discounted cash outflow of 5,50,000 75,000 and 1,00,20,000 respectively. Suppose further that the sum of discounted cash inflows for these projects are R 6,50,000, 95,000 and R 1,00,30,000 respectively. Calculate the desirability factors for the three projects. SOLUTION The desirability factors for the three projects would be as follows: R6,50,000 1. 5,50,000 1.18 NPV-100000 95,000127 75,000 =1.27 NPV=20000 2 Total Investment can be made -Rs.600000 If projects are divisible the decision should be on PI. Project 275000 Project 1= 525000 By Heena Malhotra

6. Suppose we have three projects involving discounted cash outflow of 5,50,000 75,000 and 1,00,20,000 respectively. Suppose further that the sum of discounted cash inflows for these projects are R 6,50,000, 95,000 and R 1,00,30,000 respectively. Calculate the desirability factors for the three projects. SOLUTION The desirability factors for the three projects would be as follows: 6,50,000 1. 5,50,000 1.18 NPV-100000 75000 1.27NPV 20000 2. Total Investment can be made -Rs.600000 If projects are not divisible the decision should be on NPV. Project 1= 550000 By Heena Malhotra

7. Since Pl is an extension of NPV it has same advantages and limitation. Advantages of PI The method also uses the concept of time value of money and is a better project evaluation technique than NPV value of cash outflow,it is a relative measure of a project's profitabilit. Profitability index fails as a guide in resolving capital rationing where projects are In the Plmethod, since the present value of cash inflows is divided by the present Limitations of P By Heena Malhotra indivisible.

8. Suppose we have three projects involving discounted cash outflow of 5,50,000 75,000 and 1,00,20,000 respectively. Suppose further that the sum of discounted cash inflows for these projects are R 6,50,000, 95,000 and R 1,00,30,000 respectively. Calculate the desirability factors for the three projects. SOLUTION The desirability factors for the three projects would be as follows: 6,50,000 1. 5,50,000 1.18 NPV-100000 75000 1.27NPV 20000 2. Total Investment can be made -Rs.600000 If projects are not divisible the decision should be on NPV. Project 1= 550000 By Heena Malhotra