Question
Exercise 12-5 Preference Ranking [LO12-5] Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (134,000 ) $
Exercise 12-5 Preference Ranking [LO12-5]
Information on four investment proposals is given below:
| Investment Proposal | ||||||||||||
| A | B | C | D | |||||||||
| Investment required | $ | (134,000 | ) | $ | (144,000 | ) | $ | (114,000 | ) | $ | (186,000 | ) |
| Present value of cash inflows | 190,280 | 218,880 | 159,600 | 290,160 | ||||||||
| Net present value | $ | 56,280 | $ | 74,880 | $ | 45,600 | $ | 104,160 | ||||
| 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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Mathematical Applications for the Management Life and Social Sciences
Authors: Ronald J. Harshbarger, James J. Reynolds
11th edition
978-1305108042
