Profitability Index Calculator
This calculator computes the Profitability Index (PI) and supporting metrics for capital budgeting. PI is the ratio of the present value of future cash inflows to the initial investment and helps rank projects when capital is constrained.
Two input modes are supported: (1) uniform periodic cash inflows (annuity) where a single recurring cash flow is assumed, and (2) a custom mode where you supply the pre-computed present value of all future inflows. Use the mode that best matches your cash flow profile.
Governance
Record 8b48adf48296 • Reviewed by Fidamen Standards Committee
Use when future cash inflows are identical each period.
Inputs
Advanced inputs
Annuity inputs
Custom discounted-sum input
Results
Present value of future cash inflows (PV)
-$1,500,000.00
Net Present Value (NPV)
-$1,600,000.00
Profitability Index (PI)
-15
| Output | Value | Unit |
|---|---|---|
| Present value of future cash inflows (PV) | -$1,500,000.00 | USD |
| Net Present Value (NPV) | -$1,600,000.00 | USD |
| Profitability Index (PI) | -15 | — |
Visualization
Methodology
For the annuity method the present value of equal periodic cash inflows is calculated using the standard present-value annuity formula PV = C * (1 - (1 + r)^-n) / r, where C is the periodic cash inflow, r is the discount rate (decimal), and n is the number of periods.
For the custom method the calculator treats the entered sum as the already-discounted total present value of future inflows. This is useful when cash inflows are irregular and you've discounted each cash flow externally.
Worked examples
Example (annuity): Initial investment = 100,000; periodic inflow = 30,000; periods = 5; discount rate = 10%. PV = 30,000 * (1 - 1.1^-5) / 0.10 ≈ 113,355. PI = 113,355 / 100,000 = 1.1336. NPV ≈ 13,355.
Example (custom): If you have individually discounted irregular inflows that sum to 80,000 and the initial investment is 60,000 then PI = 80,000 / 60,000 = 1.3333 and NPV = 20,000.
F.A.Q.
What does a PI greater than 1 mean?
A PI greater than 1 indicates the present value of inflows exceeds the initial investment and the project is expected to create value (positive NPV).
Which input mode should I use for irregular cash flows?
Use the custom discounted-sum mode: discount each individual inflow to present value at your chosen discount rate, sum them, and enter the total as the PV input.
Does the calculator handle varying discount rates over time?
No. This tool assumes a constant discount rate. For time-varying discount rates discount each inflow separately and use the custom discounted-sum input.
Can initial investment be entered as a negative number?
Enter the initial investment as a positive amount representing the capital outlay. The calculator treats it as the project cost when computing PI and NPV.
Is this a substitute for professional financial advice?
No. This calculator is a decision-support tool. For regulatory reporting, audit, tax, or large capital decisions consult a qualified financial professional.
Sources & citations
- NIST - National Institute of Standards and Technology — https://www.nist.gov
- ISO - International Organization for Standardization — https://www.iso.org
- IEEE - Institute of Electrical and Electronics Engineers — https://www.ieee.org
- OSHA - Occupational Safety and Health Administration — https://www.osha.gov
- SEC — Non-GAAP Financial Measures Guidance — https://www.sec.gov/corpfin/non-gaap-financial-measures
- FASB — Financial Accounting Standards Board — https://www.fasb.org/
- CFA Institute — Global Investment Performance Standards (GIPS) — https://rpc.cfainstitute.org/gips-standards
Further resources
Versioning & Change Control
Audit record (versions, QA runs, reviewer sign-off, and evidence).
Record ID: 8b48adf48296What changed (latest)
v1.0.0 • 2025-11-20 • MINOR
Initial publication and governance baseline.
Why: Published with reviewed formulas, unit definitions, and UX controls.
Public QA status
PASS — golden 25 + edge 120
Last run: 2026-01-23 • Run: golden-edge-2026-01-23
Versioning & Change Control
Audit record (versions, QA runs, reviewer sign-off, and evidence).
What changed (latest)
v1.0.0 • 2025-11-20 • MINOR
Initial publication and governance baseline.
Why: Published with reviewed formulas, unit definitions, and UX controls.
Public QA status
PASS — golden 25 + edge 120
Last run: 2026-01-23 • Run: golden-edge-2026-01-23
Engine
v1.0.0
Data
Baseline (no external datasets)
Content
v1.0.0
UI
v1.0.0
Governance
Last updated: Nov 20, 2025
Reviewed by: Fidamen Standards Committee (Review board)
Credentials: Internal QA
Risk level: low
Reviewer profile (entity)
Fidamen Standards Committee
Review board
Internal QA
Entity ID: https://fidamen.com/reviewers/fidamen-standards-committee#person
Semantic versioning
- MAJOR: Calculation outputs can change for the same inputs (formula, rounding policy, assumptions).
- MINOR: New features or fields that do not change existing outputs for the same inputs.
- PATCH: Bug fixes, copy edits, or accessibility changes that do not change intended outputs except for previously incorrect cases.
Review protocol
- Verify formulas and unit definitions against primary standards or datasets.
- Run golden-case regression suite and edge-case suite.
- Record reviewer sign-off with credentials and scope.
- Document assumptions, limitations, and jurisdiction applicability.
Assumptions & limitations
- Uses exact unit definitions from the Fidamen conversion library.
- Internal calculations use double precision; display rounding follows the unit's configured decimal places.
- Not a substitute for calibrated instruments in regulated contexts.
- Jurisdiction-specific rules may require official guidance.
Change log
v1.0.0 • 2025-11-20 • MINOR
Initial publication and governance baseline.
Why: Published with reviewed formulas, unit definitions, and UX controls.
Areas: engine, content, ui • Reviewer: Fidamen Standards Committee • Entry ID: b30de8e510ce