Reveal the Top Appraisal Method Maximizing Investment Returns
Profitability Index: Balancing Risk and Reward
The Profitability Index (PI) is a ratio that compares the present value of future cash flows to the initial investment cost. A PI greater than one suggests that the investment is likely to be profitable. This method is particularly useful for ranking projects when capital is limited, allowing investors to prioritize those with the highest potential returns relative to their costs4.