Profitability Index Calculator

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.

Initial Investment (Absolute Value): Cash Flow Each Year (Separated by Comma): Discount Rate (%):

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:

Profitability Index Calculator

You'll then get the Profitability Index of 1.366:

Profitability Index Calculator

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.