h 10: Assignment - The Basics of Capital Budgeting: Evaluating Cash Flows The profitablity index (PD) is a capital budgeting tocl 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 (NIw). A project's PI value can be interpreted to indicate a project's discounted return generated by each doliar of net investment required to generate those returns. Consider the case of Fuzzy Badger Transport Company: Fuzzy Badger Transport Company is considering investing $400,000 in a project that is expected to generate the following net cash flows: Fuzay Badger uses a WACC of 9% when evaluating proposed capital budoeting projects. Based on these cash flows, determine this project's PI (rounded to four decimal places). 3.3707 3,7078 3,0336 3.5392 Fuzy Badger's decision to accept or reject this project is independent of its decisions on other projects. Based on the project's Mt, the firm should the project. Br comparison, the net present value (NPV) of this project is - On the basis of this evaluation criterion, Fuzzy Badger should in the project because the project increase the firm's value. When a project has a PI greater than 1.00, it will exhibit an NPV 3. when it has a PI of 1.00 , it will have an NPV equal to $0. Projects with pls 1.00 will exhibit negative NPVs