Profitability Index

The 'Profitabilty Index looks at the ratio of the NPV compared to the initial investment required:

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Compare the following projects:

30

5

5

20

5

15

Project	$C_{0}$	$C_{1}$	$C_{2}$	NPV at 10%
A
21
B
16
C
12

The profitability index would be:

Project	Investment	NPV	Profitability Index
A	10	21	2.1
B	5	16	3.2
C	5	12	2.4