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Indicators of efficiency of investments

Calculation of key performance indicators in the Budget Plan Express
Payback period – PB
Discounted payback period – DPB
Net discounted (present) value – NPV
Profitability index – PI
Internal rate of return – IRR
Average rate of return – ARR
Modified IRR – MIRR (Modified Internal Rate of Return)
Economic profit measure EVA (Economic Value Added) and other complex indicators

Profitability index – PI


Profitability index – PI

Profitability index is the ratio of the adjusted income to the amount of invested capital.

Profitability index is calculated using the following formula:

    Profitability index-PI. Profitability index is the ratio of the reduced income to the amount of invested capital. Budget-Plan Express all calculated indicators of efficiency of investments
    Where:
    CFn – net discounted cash flow in the n period,
    In – initial investment in the n period (or total investment),
    r – discount rate,
    NPV net discounted (present) income.

At values PI > 1 it is considered that this investment is effective.

☛ Note that the result of calculations is influenced by the discounting step chosen by the user, and other settings of the calculation parameters of investment indicators.





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