Profitability Index Calculator
Calculate the profitability index (PI) to evaluate investment efficiency and capital allocation.
Investment Details
$100,000
$10,000$10,000,000
10%
1%30%
Year 1
Year 2
Year 3
Year 4
Year 5
Profitability Index (PI)
1.291
Accept: $0.29 created per $1 invested
PV of Cash Flows
$129,079
NPV
$29,079
Initial Investment
$100,000
Value per $1 Invested
$0.29
PI Decision Rule
PI > 1Accept (creates value)
PI = 1Indifferent (break-even)
PI < 1Reject (destroys value)
Profitability Index Formula
PI = PV of Future Cash Flows / Initial Investment = 1 + (NPV / Initial Investment)
When to Use PI
Best for capital rationing when you need to rank projects by efficiency rather than absolute value.
PI vs NPV
PI shows value per dollar; NPV shows total value. Use NPV for mutually exclusive projects, PI for independent projects with limited capital.