Use this profitability index calculator to determine the cost-effectiveness of your investments quickly and easily.
Profitability Index Calculator
How to Use the Profitability Index Calculator
To calculate the Profitability Index (PI) using this calculator, simply enter the Present Value of Future Cash Flows and the Initial Investment Amount into the respective fields. Then, click the “Calculate” button.
How It Calculates Results
The Profitability Index is calculated by dividing the Present Value of Future Cash Flows by the Initial Investment Amount. It measures the relative profitability of an investment and a PI greater than 1 suggests that the investment is likely to be profitable.
Limitations
The calculator assumes all cash flows are included in the Present Value calculation and that the timing and risk of these cash flows are accurately factored in. It does not take into consideration external factors such as changes in interest rates, inflation, or unexpected expenses that can impact the true profitability of an investment.