Profitability Index Calculator
Compare the present value of a project's future cash flows with what you invest to get a value-per-unit ratio.
Quick answer
The profitability index is the present value of future cash flows divided by the initial investment: PV / investment, with each flow discounted at (1+r)^t. Above 1 means NPV is positive.
Profitability Index Calculator
Net Cash Flow per Year
Profitability Index
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PV of Cash Inflows
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Initial Investment
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Net Present Value (NPV)
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Present value of each year's cash flow
Present Value of Cash Flows
| Year | Cash flow (₹) | Discount factor | Present value (₹) | Cumulative PV (₹) |
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Assumptions & method
- PI = PV of future cash flows ÷ initial investment, where PV = Σ cash flow ÷ (1 + r)^k and r is the annual discount rate.
- NPV = PV of future cash flows − initial investment, so PI = 1 + NPV ÷ initial investment.
- Cash flows arrive at the end of each year and the investment is paid in full at time 0. The discount rate is constant.
- Negative cash flows after year 0 are discounted and netted inside the present value rather than added to the investment.
- Not included: taxes, inflation, salvage value, capital rationing across several projects, financing costs and risk beyond what the discount rate captures.
Results are estimates based on the figures you enter. They are not guarantees and not financial advice.
What is the profitability index?
The profitability index, also called the benefit-cost ratio, divides the present value of a project's future cash flows by its initial investment. A result of 1.50 means each unit invested is expected to return 1.50 units in present-value terms. Because it is a ratio, it lets you rank projects of different sizes when capital is limited, something NPV alone cannot do. It always agrees with NPV on whether a single project is worthwhile: PI above 1 means NPV above zero. This calculator discounts each yearly cash flow at your rate and shows the PV, NPV and a year-by-year table.