# 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

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