Question
Bolingbrook Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Project
Bolingbrook Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:
| Project | Investment Required | Net Present Value | Life of the Project (years) | Internal Rate of Return |
| A | $880,000 | $434,360 | 7 | 24% |
| B | $685,000 | $371,170 | 12 | 20% |
| C | $580,000 | $223,220 | 7 | 21% |
| D | $780,000 | $165,060 | 3 | 22% |
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| The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, which to accept second, and so forth. The companys investment funds are limited. |
| Required: | |
| 1. | Compute the project profitability index for each project. (Round your answers to 2 decimal places.)
2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return. |
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