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advantages and disadvantage of profitability indexadvantages of profitability indexa simple to understand and utilizeb the part of npv in the venture
example of npv value a company is faced along with the following five 5 investment opportunities as costnpvpi total pv
profitability index or pipi benefit-cost ratio present value of inflows present value of cash outlaywhether pi is greater than 10 invest and
advantagesand disadvantages of irradvantages of irrit seems time value of moneyit seems cash flows over the whole life of the projectit is compatible
acceptance rule of irrirr will accept a venture if its irr is higher than or equivalent to the minimum required rate of return such is usually the
trial and error methoda select any rate of interest on random and employ it to compute npv of cash inflowsb if rate selected produces npv lower than
irr or internal rate of returnthis method is a discounted cash flow technique that uses the principle of npv it is described as the rate such
accept or reject rule of npvunder this method a company should accept an investment venture if npv is positive that is if present value of cash
example of npv methodresolution limited intends to purchase a machine worth shs1 500000 that will have a residue value shs200000 after 5 years
net present value method - examplejeremy limited wishes to expand its output by purchasing a new machine worth 170000 and installation costs are
example of net present value methodcost of investment 100000interest rate 10percentinflows year 1 80000year 2 50000npv 80000 11 50000
net present value method - dcf techniquethe method discounts outflows and inflows and ascertains the total present value via deducting discounted
present value of an annuity - dcf techniquean individual investor may not necessarily acquire a lump sum after several years however rather obtain a
present value of a lump sum - dcf techniquegenerally an investor would want to know how much he or she would stop currently to get a provided amount
present value concept - discounted cash flow techniquesthis perception acknowledges the fact which a shilling losses value along with time and as
acceptance rule of accounting rate of return or arrarr procedure will accept those projects whose arr is higher rather than that set with management
disadvantages of payback period1 does not receive into account time value of money and supposes that a shilling obtained in the 1st year and in the
benefits of payback period1 use simply and understand and it has created it popular among in ascertaining the viability of venture executives mainly
acceptance rule of payback period or pbpby using pbp method a company such will accept all those ventures whose payback period is less than to set
capacity - sales of goodsthrough s4 1 provides such capacity to buy and to sell is governed through the natural law concerning capacity for contract
contract for work and materialsin robinson v graves a dispute arose over an agreement below such an artist had promised to make a portrait about 250
types of goods - sales of goodsfurther the act classifies goods into likei specific goodswhether specific goods are goods like are acknowledged and
goods - sales of goodseven if goods like in common parlance has like the act has given the word such technical meaning whether it provides like goods
sale of goodshowever in us law relating to the sale and purchase of goods is such contained in the sale of goods act like cap 31 therefore the act is
limited partnershipsthrough virtue of the limited partnerships act such the liability of certain partners that may be limited to a certain extent