Profitability Index Calculator
Compares the present value of future cash flows to the initial investment for project ranking
Enter both values to calculate
PV of cash flows minus investment
Whether the investment is profitable
Frequently Asked Questions
What is the profitability index?
The profitability index (PI) is the ratio of the present value of future cash flows to the initial investment. A PI of 1.5 means you get $1.50 of value for every $1.00 invested. PI above 1.0 indicates a profitable investment.
How is PI different from NPV?
NPV gives an absolute dollar value. PI gives a ratio, making it useful for comparing projects of different sizes. A small project with PI of 2.0 may be more capital-efficient than a large project with PI of 1.2, even if the large project has higher NPV.
When should I use the profitability index?
PI is most useful when you have limited capital and multiple investment opportunities. Rank projects by PI to maximize return per dollar invested. It helps with capital rationing decisions where you cannot fund every positive-NPV project.
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