Question
Exercise 12-5 Preference Ranking [LO12-5] Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (132,000 ) $
Exercise 12-5 Preference Ranking [LO12-5]
Information on four investment proposals is given below:
| Investment Proposal | ||||||||||||
| A | B | C | D | |||||||||
| Investment required | $ | (132,000 | ) | $ | (142,000 | ) | $ | (112,000 | ) | $ | (183,000 | ) |
| Present value of cash inflows | 211,200 | 193,120 | 161,280 | 267,180 | ||||||||
| Net present value | $ | 79,200 | $ | 51,120 | $ | 49,280 | $ | 84,180 | ||||
| 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.
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Money Banking and Financial Markets
Authors: Stephen Cecchetti, Kermit Schoenholtz
5th edition
77536320, 77536329, 1259746747, 978-1259746741
