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Profitability Index Formula

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Profitability Index (PI) is the ratio of payoff to the investment of a proposed project. Check FAQs

PI = \frac{NPV + Initial Invt}{Initial Invt}

PI - Profitability Index (PI)?NPV - Net Present Value (NPV)?Initial Invt - Initial Investment?

Profitability Index Example

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Here is how the Profitability Index equation looks like with Values.

Here is how the Profitability Index equation looks like with Units.

Here is how the Profitability Index equation looks like.

1.35 = \frac{700 + 2000}{2000}

1.35 = \frac{700 + 2000}{2000}

1.35 = \frac{700 + 2000}{2000}

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Profitability Index Solution

Follow our step by step solution on how to calculate Profitability Index?

FIRST Step Consider the formula

PI = \frac{NPV + Initial Invt}{Initial Invt}

Next Step Substitute values of Variables

∴

PI = \frac{700 + 2000}{2000}

Next Step Prepare to Evaluate

∴

PI = \frac{700 + 2000}{2000}

LAST Step Evaluate

∴

PI = 1.35

Profitability Index Formula Elements

Variables

Profitability Index (PI)

Profitability Index (PI) is the ratio of payoff to the investment of a proposed project.

Symbol: PI

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Profitability Index (PI)

Net Present Value (NPV)

Net Present Value (NPV) is a method of determining the current value of all future cash flows generated by a project after accounting for the initial capital investment.

Symbol: NPV

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Net Present Value (NPV)

Initial Investment

The Initial Investment is the amount required to start a business or a project.

Symbol: Initial Invt

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Initial Investment

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CGY = \frac{P c - P0}{P0}

Go Risk Premium

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How to Evaluate Profitability Index?

Profitability Index evaluator uses Profitability Index (PI) = (Net Present Value (NPV)+Initial Investment)/Initial Investment to evaluate the Profitability Index (PI), Profitability Index (PI) is the ratio of payoff to the investment of a proposed project. Profitability Index (PI) is denoted by PI symbol.

How to evaluate Profitability Index using this online evaluator? To use this online evaluator for Profitability Index, enter Net Present Value (NPV) (NPV) & Initial Investment (Initial Invt) and hit the calculate button.

FAQs on Profitability Index

What is the formula to find Profitability Index?

The formula of Profitability Index is expressed as Profitability Index (PI) = (Net Present Value (NPV)+Initial Investment)/Initial Investment. Here is an example- 1.35 = (700+2000)/2000.

How to calculate Profitability Index?

With Net Present Value (NPV) (NPV) & Initial Investment (Initial Invt) we can find Profitability Index using the formula - Profitability Index (PI) = (Net Present Value (NPV)+Initial Investment)/Initial Investment.

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Profitability Index Formula

Profitability Index Example

Profitability Index Solution

Profitability Index Formula Elements

Other formulas in Important Formulas of Investment category

How to Evaluate Profitability Index?

FAQs on Profitability Index

Variable Name