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ABC Company is considering $3$ independent proposals to have investment for equipment for the current year. This plan was introduced to the operations to elevate and uplift the production and bring more revenues to the company. The Operation Department recommended specs of the equipment, it should have all the needed specs or $95\%-100\%$ in order to attain the target increase in production and to minimize defective products. The management is asking for your help to evaluate the three proposals using Net present value and profitability index of each proposal and make recommendation to the management. Please refer below:

Proposal $1$ Proposal $2$ Proposal $3$

Initial Cost P $1,200,000$ P $1,600,000$ P $2,000,000$

Specs percentage $97\%98\%90\%$

Net cash flows each year:

Year $1400,000500,000700,000$

Year $2400,000600,000650,000$

Year $3400,000400,000750,000$

Year $4400,000400,000650,000$

Year Factor Proposal $1$ Proposal $2$ Proposal $3$

$1$

$2$

$3$

$4$

Total Cash Flows

Initial Investment

NPV

Profitability Index

Accept$/$Reject

Recommendation to the management:

$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$