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Profitability Index Calculator

This Profitability Index Calculator helps evaluate the relative profitability of an investment by comparing the present value of future cash flows to the initial investment.

Investment Profitability Index Estimator

Input Fields
$
Enter the initial amount invested
PV
$
Enter the present value of all future expected cash flows
If enabled, the result will update automatically when you change any value.

Profitability Index Formula

Formula
$$PI = \frac{\text{Present Value of Future Cash Flows}}{\text{Initial Investment}}$$

Where:

  • $$PI$$ = Profitability Index
  • $$Present Value of Future Cash Flows$$ = Discounted value of all future expected returns
  • $$Initial Investment$$ = Total upfront cost of the project or investment


Profitability Index – Calculation Example

Let’s say a project has a present value of future cash flows of $15,000, and the initial investment is $10,000.

Calculation:

  1. $$PI = \frac{15,000}{10,000} = 1.5$$

This means that for every dollar invested, the project returns $1.50 — a profitable investment.

The Profitability Index (PI) is a capital budgeting tool that helps investors and financial analysts determine the desirability of an investment. A PI greater than 1 indicates a potentially profitable investment, while a PI less than 1 suggests a loss. It is especially useful when comparing multiple projects with different scales of investment.

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