The formula for Profitability Index is simple and it is calculated by dividing the present value of all the future cash flows of the project by the initial investment in the project.

Jun 16, 2025 · Businesses use PI to determine if a proposed project will be a worthwhile investment. The profitability index (PI) measures the attractiveness of a project or investment. …

The Profitability Index (PI) measures the ratio between the present value of future cash flows and the initial investment. The index is a useful tool for ranking investment projects and showing …

Oct 3, 2023 · The formula for calculating the profitability index is as follows. Profitability Index (PI) = Present Value (PV) of Future Cash Flows ÷ Initial Investment. Another variation of the PI …

Aug 29, 2024 · It is easy to calculate and is an excellent statistical measure that enables you to look through the returns of a proposed project beforehand. Here’s your free practice workbook …

Apr 11, 2025 · In this blog, we have learned how to calculate and interpret the profitability index (PI) of a project, which is a ratio of the present value of future cash flows to the initial investment.

If you want to learn how to calculate your project's profitability index or learn how discounting works, keep reading! This article addresses how to use the profitability index calculation to …

Apr 9, 2024 · Profitability index (PI) is the ratio of present value of a project’s expected future cash flow and initial investment needed to undertake the project. It helps companies and investors …

Dec 4, 2024 · Investors and financial analysts often rely on the profitability index (PI) to determine whether the benefits of an investment opportunity outweigh its costs. Essentially, the PI …

This article describes how to determine the profitability index, its formula, and why it differs from net present value (NPV). We will also provide examples to give you an understanding of the …