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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.
* Please enter a year less than 50
| Profitability Index (PI) |
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| Net Present Value (NPV) |
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| Expected Cash Flows |
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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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