Finance

CAPM Model

CAPM Model is the acronym for Capital Asset Pricing Model. It is used to determine an appropriate rate of return of an asset. It’s a mathematical model that seeks to explain the relationship between risk and return in a rational equilibrium market. CAPM Model William Sharpe, John Lintner and Jan Mossin...

Profitability Index (PI)

Profitability Index (PI)  It is also called as Profit Investment Ratio. It is the ratio of investment to payoff of a proposed project. Profitability Index = PV of future cash flows/ PV of initial investment The Profitability Index simply answers the question of how much in present value benefits is created per...

Net Present value

Net Present value  is the difference between the present value of cash inflows and the present values of cash outflows. It is used in capital budgeting to analyze the profitability of an investment. The formula for NPV is, In other words, NPV compares the value of money today and the value of...