For example, assume a project has a budgeted cost of $10,000 but actually cost only $8,000. Dividing $10,000 by $8,000 produces a CPI of 1.25, which means the project is 25 percent under budget ...

Therefore, projects with larger cash inflows may result in lower profitability index calculations because their profit margins are not as high. The PI is also called the benefit-cost ratio.

The profitability index (PI) is a valuable tool for investors when evaluating the long-term success of a project. This financial metric, also known as the profit investment ratio, calculates the ...