# 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

## 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.