1) Assume the following information for three investment proposals:

	Proposal A				Proposal B				Proposal C
Investment required	$	(200,000	)		$	(255,000	)		$	(350,000	)
Present value of cash inflows		220,000				315,000				420,000
Net present value	$	20,000			$	60,000			$	70,000

Based on the profitability index, which of the following statements is true?

• Proposal C is preferable to Proposal B

• Proposal A is preferable to Proposal C

• Proposal A is preferable to Proposal B

• Proposal B is the highest ranked proposal among the three choices.

2) Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The internal rate of return on this investment is closest to:

• 19%.

• 21%.

• 23%.

• 24%.