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| LaTeX Math Block | ||||
|---|---|---|---|---|
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\mbox{PI} = 1 + \frac{\mbox{NPV}}{\mbox{I}_0} = \frac{\mbox{PV}[CF^+]}{I_0} |
where
| Net Present Value | ||||
| Initial Investment | ||||
| Cash Inflows |
The key difference with NPV is that PI shows a value of returns per unit cash invested.
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If this is not the case and the future cash flows include additional investments (for example additional paid in capital and/or capex CAPEX) then one need to avoid this metric and chose other give a preference to other methods of assessing the investment profitability, like Present Value Index (PVI) and Modified Internal Rate of Return (MIRR) .
See also
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Economics / Investment / Financial Investment
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