Estimating the cash flow generated by $1 invested in investment 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 ratio 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. Consider the case of Blue Moose Home Builders: Blue Moose Home Builders is considering investing $500,000 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). 2.01902.52382.77622.6500