00:01
So, here in a question we have to determine the profitability indexes and rank the investment projects in descending order.
00:10
We have to do two things profitability indexes.
00:16
We have to determine rank projects in descending order.
00:32
So here for this we have to do pi calculation that is profitability index.
00:37
So pi is calculated by the formula which is npv divided by the net investment here npv refer for net present value.
00:53
So let's do for each project when we talk for project 1 so project 1 put the values here npv is $60 ,000 net investment is 5 lakhs $70 ,000 when we calculated we bought 0 .10 when we talk about the project to npv is $25 ,000 divided by net investment, which is 3 lakh $10 ,000 when we calculated we got 0 .081 for project 3 npv will be 18 ,000 and net investment is given 1 lakh 30 ,000.
01:53
So we got it minus 0 .138 project for 4.
02:02
So here npv is $7 ,000 divided by net investment is 1 lakh $80 ,000 here.
02:16
We got 0 .039 pi.
02:21
Let's talk about the project 5.
02:28
So here npv is $39 ,000 divided by 3 lakh $80 ,000.
02:37
So we got pi is 0 .103 when we talk about project 6 here npv is $75 ,000 divided by 5 lakh $60 ,000.
02:56
So here we got pi is 0 .134.
03:04
Let's calculate pi for project 7 here npv is $16 ,000 divided by net investment, which is 3 lakh $20 ,000.
03:20
So we got the pi is 0 .05.
03:23
Now, let's talk about the project 8 here npv is $32 ,000 divided by net investment is 2 lakh $50 ,000.
03:40
We got the pi is 0 .128.
03:44
So these are the pi's for the different projects.
03:48
Now when we ranking the ranking projects in descending order based on pi.
04:06
So here the descending order according to the descending order number one at number one.
04:18
We got project 6 number 2 at number 2.
04:24
We got project 1 at number 3...