Profitability Index PI — evaluates a project based on calculation of value per unit of investment. Capital investment appraisal is the budgeting of major capital and investment to company expenditure which facilitates the determination of the concerned firm 's investments.
Thus there is an inverse proportional relation between discount rate and NPV.
Usually, organizations have many projects that are appraised simultaneously for financial viability. These values are added to NPV in the course of capital investment appraisals.
The discount factor r can be calculated using: Examples: N.
Commercial programmes must be careful not to be overly dependent on non-financial benefits, as anything can be justified through subjective views of value.
The way that the finances are controlled can determine how successful the company is.