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Coupon Accepted Successfully!

 
Treatment of Floatation Costs
  • Increase in Initial Cost of Project (Preferred)
     
  • Incorporate Floatation Costs in discount rate (not Preferred)
 
Profitability index

PI = 1 + NPV/CF0

If PI > 0, accept project

If PI < 0, reject project

Avg. Accounting Rate of return (AAR)

AAR = Avg. NI / Avg. BV




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