Profitability Index Calculator


*Work is in progress to make this calculator capable of dealing with the full scope of the math required for this problem. Until then, visit NPV Calculator



Present Value of Future Cash Flows : $

Initial Investment : $


       

Profitability:          


Profitability Index Formula

 

Profitability Index = (PV of future cash flows) / Initial investment

Or

 

= (NPV + Initial investment) / Initial Investment

Profitability Index Example

 

Arch company invested $30,000 for a project and expects the NPV of that project to be $9,000.

Profitability Index = (30,000 + 9,000) / 30,000 = 2.3 

This means a company should perform the investment project because profitability index is greater than 1.

 



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