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. …

What is the Profitability Index? 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 …

Nov 15, 2024 · Present value of future cash flows / the initial investment = profitability index. Or. (Net present value + initial investment) / initial investment – profitability index. To find more …

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 …

Aug 29, 2024 · Profitability index is a technique to evaluate the viability of investments/projects. It helps you forecast the returns and feasibility of a project to see if it is even worthwhile to …

May 8, 2025 · The Profitability Index (PI) is a key financial metric used to evaluate investment projects. It tells you how much value you’ll receive for every dollar invested — making it a …

In mathematical terms, the profitability index takes the shape of a ratio, dividing the present value of projected future cash flows by the initial investment required for the project: PI = present …

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 …

Apr 1, 2025 · - The formula for calculating the PI is straightforward: \ [ \text {PI} = \frac {\text {Present Value of Cash Flows}} {\text {Initial Investment}} \] - A PI greater than 1 indicates that …