10 i what does the profitability index pi measure

  • ITESM
  • FINANCE 101
  • Homework Help
  • DoriSanti
  • 47
  • 100% (1) 1 out of 1 people found this document helpful

This preview shows page 40 - 43 out of 47 pages.

10%
i. What does the profitability index (PI) measure? What are the PIs for Franchises S and L?
j. 1. What is the payback period? Find the paybacks for franchises L and S. 50 3 | 80
j. 2. What is the rationale for the payback method? According to the payback criterion, which franchise or franchises should be accepted if the firm's maximum acceptable payback is 2 years, and if franchises L and S are independent? If they are mutually exclusive?
Mini Case: 1 0 1 - 41
j. 3. What is the difference between the regular and discounted payback periods?
j. 4. What is the main disadvantage of discounted payback? Is the payback method of any real usefulness in capital budgeting decisions? ,

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture