Enter your values in the *Profitability Index* calculator. The cash flow for each year (in the second entry box) should be separated by a comma. Example is included below.

## How to use the Profitability Index Calculator

Let's suppose that you want to derive the Profitability Index, given the following information:

- The initial investment is $1300
- The project is expected to generate:
- $500 in year-1
- $750 in year-2
- $800 in year-3

- The discount rate is 7%

You may then plug the values in the calculator, and then click on the **Calculate Profitability Index** button:

You'll then get the Profitability Index of **1.366**:

Since the Profitability Index is greater than 1, then you should invest in the project.

## How to Manually Calculate the Profitability Index

You can use the following equation to manually calculate the **Profitability Index**:

```
NPV
Profitability Index (PI) = 1 + Initial investment
```

Where NPV is the Net Present Value.

Let's now see how to derive the Profitability Index, given the following information:

- The initial investment is $1300
- The Net Present Value (NPV) is =
**475.407**

Plug the values in the equation, and you'll get the Profitability Index (PI) of **1.366**:

NPV 475.407 Profitability Index (PI) = 1 + Initial investment = 1 + 1300 = 1.366

Since the PI is greater than 1, then you should invest in the project.