# Calculating Profitability Index in Excel

Profitability index is an important measure in project finance to decide whether to invest in a project or not. It is calculated as the ratio of present value of a project cash flows and the initial investment.

$Profitability\ Index = \frac{PV\ of\ Future\ Cash\ Flows}{Initial\ Investment}$

If the profitability index is greater than 1, the project is accepted, and if it is less than 1, the project is rejected.