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 our home page to calculate the NPV
Profitability Index Formula
Profitability Index = (PV of future cash flows) / Initial investment
= (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.