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 cont (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 $400,000 in a project that is expected to generate the following net cash flows: Year Cash Flow Year 1 $350,000 Year 2 $500,000 Year 3 $425,000