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Profitability Index Calculator
Calculate the Profitability Index (PI) of a project from the present value of its future cash flows and its initial investment, to see whether it creates or destroys value.
How to Use Profitability Index Calculator
- 1Calculate the present value of the project's future cash flows (use Present Value Calculator or NPV Calculator)
- 2Enter that PV amount
- 3Enter the initial investment
- 4Click Calculate to see the Profitability Index and accept/reject guidance
Frequently Asked Questions
This calculator doesn't compute it from raw yearly cashflows itself — work it out first using the Present Value Calculator (for a single future amount) or the NPV Calculator (for a series of cashflows, then add back the initial investment), then enter that total PV here.
PI > 1 means the project's discounted returns exceed its cost — accept. PI < 1 means the reverse — reject. PI = 1 is breakeven. It's mathematically related to NPV: PI = (NPV + Initial Investment) ÷ Initial Investment.
When you're comparing projects of different sizes with a limited capital budget — PI ranks projects by value created per rupee invested, which NPV alone (an absolute rupee figure) doesn't show.
No — PI, NPV, and IRR are complementary. Well-run capital budgeting typically checks a project against more than one of these methods rather than relying on just one.
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