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Profitability Index & Ten-Year Cash Flows

Calculate present value per unit of initial investment, using a supplied present value or up to ten year-end cash flows.

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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Where results are editable, change one to solve backwards. Lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

An initial investment of $1,000 with future cash flows worth $1,250 today gives a profitability index of 1.25. The index compares present value with the initial outlay.

Profitability index = present value of future net cash flows / initial outlay; present value = sum of CFt / (1 + r)^t

Worked example

Enter these known values and leave the other values blank.

Initial outlay
1000 USD
Present value of future net cash flows
1250 USD
Profitability index (PI)
1.25

Assumptions and limitations

  • The initial outlay must be positive. Future net cash flows occur at the end of each year and can be positive, zero or negative. The initial outlay is not included again among future flows.
  • The annual discount rate is constant and ranges from 0% to below 100% in this reviewed model. Negative rates and rates of 100% or more are outside its supported domain.
  • The cash-flow model provides ten annual slots. Reducing the displayed year count does not delete nonzero later flows: they remain included and visible. Clear a later amount to remove it.
  • An index above one means the supplied discounted future flows exceed the initial outlay under these assumptions. It does not measure risk or guarantee returns, and it need not rank mutually exclusive projects the same way as net present value.

Common questions

Does zero discounting work?

Yes. At a 0% discount rate, present value is the arithmetic sum of the entered future cash flows.

Is profitability index the same as net present value?

No. Profitability index is a ratio. For a positive initial outlay, net present value equals that outlay multiplied by (index − 1).

References

Bookify supports zero discounting and requires a whole number of displayed cash-flow years.

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