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11. Profitability index Estimating the cash flow generated by $1 invested in investment The profitability index (PT) capital budgeting tool that provides another way to compare a project's benetes and costs. It is computed a of the discounted value of the net anthems cxpected to be generated by a project ever is Me (the project's capaced benes) to its ne cost ONUNV). A pred value can be wterpreted to date project discounted retum generated by each dator of est vivestment required to generate the returns Fuzzy Badger Transport Company is considering svesting $500,000 in a project that is expected to generate the following net cash flow Year Yeart Year 2 Cash Flow $275,000 $425,000 $400,000 $475,000 Year Year Puzzy Badoer na wcf8% when evaluating proposed capital budgeting projects. Based on these cash flows, determine the projedy PI (rounded to four decimal places) 2.699 2.6284 O 25713 2.4437 ureyadan's drosion to accept or reject the projects independent of its decisions on other projects. Based on the projects, the firm should the project By companion, the net present value (NPV) of this project is in the project because the project On the basis of this evaluation criterion, rury Badger should increase the firm's value when it has a P1 of 1.00, it will have an NPV equal to $0. When a project has w PE greater than 1.00, it will exhibit an NPV Projects with PIS 1.00 will exhibit negative NPVS