Blue Mooses decision to accept or reject this project is independent of its decisions on other projects. Based on the projects PI, the firm should REJECT OR ACCEPT the project.

By comparison, the net present value (NPV) of this project is (912995, -310829, 760829, 836912, 722788, 608663). On the basis of this evaluation criterion, Blue Moose should (NOT INVEST, INVEST) in the project because the project ( WILL NOT, WILL) increase the firms value.

When a project has a PI greater than 1.00, it will exhibit an NPV (EQUAL TO $0, LESS THAN $0, GREATER THAN $0) ; when it has a PI of 1.00, it will have an NPV equal to $0. Projects with PIs (EQUAL TO, LESS THAN, GREATER THAN) 1.00 will exhibit negative NPVs.

The profitability index (PI) is a capital budgeting tool that provides another way to compare a project's benefits and costs. It is computed as a rat of the discounted value of the net cash flows expected to be generated by a project over its life (the project's expected benefits) to its net cost (NINV). A project's PI value can be interpreted to indicate a project's discounted return generated by each dollar of net investment required to generate those returns. Blue Moose Home Builders is considering investing $450,000 in a project that is expected to generate the following net cash flows: Blue Moose uses a WACC of 10% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this project's PI (rounded to four decimal places) 2.8252 2.1526 2.4216 2.6907 Blue Moose's decision to accept or reject this project is independent of its decisions on other projects. Based on the project's PI, the firm should the project. ison, the net present value (NPV) of this project is in the project because the project . On the basis of this evaluation criterion, Blue Moose should increase the firm's value. When a project has a PI greater than 1.00 , it will exhibit an NPV ; when it has a PI of 1.00 , it will have an NPV equal to $0. Projects with PIs 1.00 will exhibit negative NPVs