Instruction

1

**The index**

**of profitability**of investments is important not only for potential investors but for the enterprise. On how effectively it conducts its economic activities in the area of cost optimization, pricing, market research and, as a consequence, the profit depends on, whether will receive the enterprise additional capital. And therefore whether it would be able to develop and expand their production.

2

Analysis

**of profitability**shows the degree of attractiveness of a particular company to invest the investor's own funds. In particular, the index**of profitability**allows to determine the expected return after selling the product will bring investments for each subfolder monetary unit (the ruble, dollar, etc.)3

**Index**

**profitability**equal to the ratio of the present value of the investment project the investment costs for its implementation:PI = ∑ CF_k / ( 1 + i )^k / INV where:CF_k – the company's cash flow in time period k;i is the discount rate;INV is the investment of funds.

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Given the cost of the project is the net present income that is equal to the difference between the present value of the projected project and the amount of the initial investment. This figure in itself is significant for shareholders because it reflects the immediate increase in capital of the company. It makes sense to talk about

**profitability**of investment only if it has positive value.5

The discount rate usually taken as equal to the refinancing rate. Its value can be equal to the average rate of return on the market adjusted for possible risks (problems with the implementation, inflation, etc.) discounting is a calculation of the estimated present value of the project according to the formula of compound interest.

6

It should be noted that the negative value of the present value of the project does not necessarily mean unattractiveness of the project for investment, but only a wrong choice of the discount rate. Enough to change this number and the calculation may give different results. This suggests that you should carefully analyze future investments, so as not to miss the maximum possible profit.

7

**The index**

**of profitability**is the percentage norm

**of profitability**:PI = P/100% + 1, where P is the return on investment plus.