# Profitability Index Calculator

Instructions: Use this Profitability Index Calculator to compute the profitability index ($$PI$$) of a stream of cash flows by indicating the yearly cash flows ($$F_t$$), starting at year $$t = 0$$, and the discount rate ($$r$$) (Type in the cash flows for each year from $$t=0$$ to $$t = n$$. The first cash flow must be negative. Type '0' if there is no cash flow for a year): Interest Rate $$(r)$$ = Type the yearly cash flows (comma or space separated)

## Profitability Index Calculator

More about the this PI calculator so you can better understand how to use this solver: The profitability index of a stream of cash flows $$F_t$$ depends on the discount interest rate $$r$$, and the cash flows themselves. It is computed as the present value ($$PV$$) after the initial investment $$I$$. Let:

$PV = \displaystyle \sum_{i=1}^n \frac{F_i}{(1+i)^i}$

be the present value ($$PV$$) after the initial investment. The profitability index is therefore:

$PI = \frac{PV}{I}$

Other ways to evaluate a project include using instead a NPV calculator or also a IRR calculator. Those two metrics are the most common ones used to evaluate and make the decision of whether or not a project should be undertaken.

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