Profitability index
From ACT Wiki
(PI).
The profitability index may be represented by the following formula:
Profitability index = PV/Co
Where:
PV = the present value of all the cashflows except the initial investment.
Co = the absolute value of the initial investment.
Calculated on this basis, projects with a PI > 1 are acceptable.
Alternative definition
The profitability index may also be represented by the following alternative formula:
Profitability index = NPV/Co
Where:
NPV = net present value of all positive and negative cashflows, including the initial investment outflow Co
When defined on this alternative basis, the minimum threshold of acceptability becomes a profitability index of 0.