Online Calculators > Financial Calculators > Profitability Index Calculator

Profitability Index Calculator

Profitability index calculator to calculate the profitability of an investment or project profitability index. The Profitability Index Formula is given below on how to calculate profitability index.

Profitability Index Calculator

Initial Investment: $
Discount Rate: %

Profitability Index Result

Profitability Index (PI)
Net Present Value (NPV)
Expected Cash Flows

Profitability Index Formula

Following is the profitability index formula to calculate the profitability index of a business.

Profitability Index = PV of future cash flows / Initial investment

How to Calculate Profitability Index

To use the profitability index formula, let's try an example. If a business requires an initial investment of $100,000 with a discount rate of 10% and produces the following cash flow

Year 1: $10,000
Year 2: $20,000
Year 3: $30,000
Year 4: $40,000

Here's how to calculate the profitability index
PI = [ 10000/(1.1)^1 + 20000/(1.1)^2 + 30000/(1.1)^3 + 40000/(1.1)^4] / 100000 = 0.0755

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