Rank projects by the present value of cash flows per dollar invested.
Please do not make financial decisions based on these results.
What is the Profitability Index Calculator?
Rank projects by the present value of cash flows per dollar invested. To use the Profitability Index Calculator, enter initial investment, yearly cash flows, discount rate; it returns profitability index, pv of cash flows, net present value, and shows them instantly as you type.
Where the Profitability Index Calculator fits
Rank projects by the present value of cash flows per dollar invested. The main figure it returns is the Profitability index, worked out from the values you enter.
It belongs with the other business planning tools. If you are comparing options or checking a result from another angle, try the HHI Calculator (Herfindahl-Hirschman Index Calculator), Lerner Index Calculator or the PVGO Calculator.
How to use the Profitability Index Calculator
- Enter your numbers. Start with Initial investment ($), Yearly cash flows (comma separated), Discount rate (%). Use figures from the same period (same month, quarter or year) for every field. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Profitability index, and the cards below show PV of cash flows, Net present value. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the Profitability Index Calculator using the default values shown in the calculator above:
Inputs
| Initial investment ($) | 50,000 |
|---|---|
| Yearly cash flows (comma separated) | 15000, 18000, 20000, 20000, 15000 |
| Discount rate (%) | 10 |
Results
| Profitability index | 1.33 |
|---|---|
| PV of cash flows | $66,512.78 |
| Net present value | $16,512.78 |
With these inputs the calculator returns Profitability index: 1.33. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Initial investment ($) from 50,000 to 60,000 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Profitability index | 1.33 | 1.11 | -16.7% |
| PV of cash flows | $66,512.78 | $66,512.78 | 0% |
| Net present value | $16,512.78 | $6,512.78 | -60.6% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
What the results tell you
The results panel of the Profitability Index Calculator reports Profitability index, pv of cash flows and net present value. Compare these figures while changing one input at a time, and use the related calculators below to look at the same situation from another angle.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
When should a project be accepted?
Accept when PI is above 1, meaning the present value of benefits exceeds the cost.
Can these calculators replace an accountant?
No. They give fast estimates from your inputs. Use an accountant for tax, audited accounts and valuation reports.
Can I use these for a business plan?
Yes. They give quick estimates for break-even, valuation, budgets and project returns. Confirm important figures with your accountant before relying on them.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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