...
| LaTeX Math Block | ||
|---|---|---|
| ||
PI = 1 + \frac{NPV}{I_0} |
where
| Net Present Value | ||||
| Initial Investment |
...
This particularly means that projects with higher NPV may be less attractive in PI terms as it required a high initial investment.
This allows a fair comparison of investment efficiency between two investment projects with different initial investments.
The corporate investment policy usually dictates that:
...