Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Question
Chapter 22.6, Problem 1CC
Summary Introduction
To discuss: The profitability index rule of thumb.
Introduction:
Profitability index is a payoff ratio of the investment on a planned project. It is utilized for ranking the projects. The relationship between
If the profitability index is greater than 1, then NPV is positive.
If the profitability index is less than 1, then NPV is negative.
If a company has many positive NPV projects and is subjected to capital restrictions, then the profitability index might give a fair measure of ranking for the projects.
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Corporate Finance
Ch. 22.1 - What is the difference between a real option and a...Ch. 22.1 - Why does a real option add value to an investment...Ch. 22.2 - Prob. 1CCCh. 22.2 - Prob. 2CCCh. 22.3 - What is the economic trade-off between investing...Ch. 22.3 - Prob. 2CCCh. 22.3 - Does an option to invest have the same beta as the...Ch. 22.4 - Why can a firm with no ongoing projects, and...Ch. 22.4 - Why is it sometimes optimal to invest in stages?Ch. 22.4 - How can an abandonment option add value to a...
Ch. 22.5 - Prob. 1CCCh. 22.5 - Prob. 2CCCh. 22.5 - Prob. 3CCCh. 22.6 - Prob. 1CCCh. 22.6 - Prob. 2CCCh. 22 - Your company is planning on opening an office in...Ch. 22 - You are trying to decide whether to make an...Ch. 22 - Prob. 3PCh. 22 - Prob. 4PCh. 22 - Prob. 5PCh. 22 - Prob. 6PCh. 22 - Prob. 7PCh. 22 - Prob. 8PCh. 22 - Prob. 9PCh. 22 - Prob. 11PCh. 22 - Prob. 12PCh. 22 - Prob. 13PCh. 22 - Prob. 15PCh. 22 - Prob. 18PCh. 22 - Prob. 19PCh. 22 - Prob. 20PCh. 22 - Prob. 21PCh. 22 - Prob. 22PCh. 22 - Prob. 23PCh. 22 - Prob. 24PCh. 22 - Prob. 25PCh. 22 - Prob. 26P
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