Profitability index (PI) Formula

ER= Sum of all Future Cash Flows n = Number of periods or years i = Interest rate or rate of return Io = Initial Investment

Description:

Profitability index is defined as the present value of the future cash flows divided by the initial investment. Rules for selection or rejection of a project: If PI > 1 then accept the project If PI < 1 then reject the project
Profitability index (PI) Formula