Question

If the NPV (net present value) of a shop is R195 000 and the profitability index is 1,2437, the initial investment is the is?

Answer 1

$PI=\frac{(NPV+ i.investment)}{i.investment}$

$1.2437=\frac{(195 000+ i.investment}{( investment)}$

$1.2437=\frac{(195000+i.investment)}{initial investment}$

1.2437×i.investment=195000+i.investment

i.investment(1.2437-1)= 195000.

$0.2437i.investment = 195000$

i.investment = $\frac{195000}{0.2437}= 800164.136$