Finance

Calculate the profitability index

How it works in Excel

• NPV values the future cash flows.
• B2 is the cost today, entered as a negative.
• The minus sign makes the cost positive.
• Above 1 suggests the project adds value.
• It helps compare projects when money is limited.

The idea in general

It shows how much value you get back for each dollar invested.

What I assumed

• The rate is in B1, the cost is in B2 as a negative, and the cash flows are in B3:B5.

Check the result on your own data before relying on it.