Exercise 12-5 Preference Ranking [LO12-5]

Information on four investment proposals is given below:

		Investment Proposal
	A			B			C			D
Investment required	$	(270,000	)	$	(90,000	)	$	(100,000	)	$	(2,800,000	)
Present value of cash inflows		393,500			127,100			151,300			3,738,500
Net present value	$	123,500		$	37,100		$	51,300		$	938,500
Life of the project		5 years			7 years			6 years			6 years

Required:

1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.)

2. Rank the proposals in terms of preference.

Investment Proposal	Project Profitability Index	Rank Preference
A
B
C
D