Profitability Index Calculator
PI = (NPV + initial) / initial = PV of future flows / initial investment. >1 = accept.
Result
Profitability index
1.3218
PI > 1 → accept.
- Initial$100,000.00
- PV of cash flows$132,183.28
- NPV$32,183.28
- PI1.3218
- DecisionAccept
Step-by-step
- PV of future flows = Σ CF_t / (1+0.1)^t = $132,183.28.
- PI = PV / initial = 132,183.28 / 100,000.00 = 1.3218.
How to use this calculator
- Enter initial investment, discount rate, and cash flows.
- Read PI; >1 means accept.
About this calculator
Profitability index (also called benefit-cost ratio) measures the value created per dollar invested. PI > 1 means present value of future flows exceeds initial cost — same conclusion as positive NPV. Useful for ranking projects under capital constraints (highest PI per dollar wins).
Frequently asked
They give the same accept/reject decision. PI ranks differently for capital rationing because it normalizes by investment size.
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