The present value of estimated future cash flows is dividing by the developer's initial investment to produce the PI. A solid transaction is one with a PI of larger than 1.0 and higher values.
Using an income statement, we may judge whether to accept or deny an investment. The mathematical methodology is used to compute it and it is based on the value of money's time value.
The valuation of all the project's future cash flows is divided by the initial investment to arrive at the uncomplicated method for calculating the profitability index.
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