Acme, Inc. is strapped for cash for investment projects and must decide which of four projects it will fund. Below are the projects and information about them:

Life of

Net the Internal

Investment Present Project Rate of

Project Required Value in Years Return

$1$ $$80,000$ $$210,000613\%$

$2$ $$750,000$ $$340,0001017\%$

$3$ $$845,000$ $$333,000712\%$

$4$ $$695,000$ $$202,000518\%$

Required

Compute the project profitability index for each project.

Rank the four projects in order of preference in terms of :

Internal rate of return

Project profitability index

Net present value.

Which of the three rankings above do you prefer? Why? What are the strengths and weaknesses of each method?