Question

If the Npv of a shop is R195000 and the profitability index is 1,24375, the initial investment in the shop is

Answer 1

$PI=(NPV+$ initial investment)$\div$ initial investment

$1.24375=(195 000+Initial \space investment)\div$$initial\space investment$

$1.24375 \times initial \space investment=195000+initial\space investment$

$1.24375\times initial\space investment-initial\space investment=195000$

$initial\space investment (1.24374 -1)=195000, \\ \space initial\space investment=195000/0.24373=800065.6$