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Exercise 13-5 Preference Ranking [LO13-5] Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (190,000) $ (180,000)

Exercise 13-5 Preference Ranking [LO13-5]

Information on four investment proposals is given below:

Investment Proposal

A B C D
Investment required $ (190,000) $ (180,000) $ (170,000) $ (900,000)
Present value of cash inflows 267,400 249,400 259,300 1,197,500
Net present value $ 77,400 $ 69,400 $ 89,300 $ 297,500
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.)

Investment Proposal Project Profitability Index
A
B
C
D

2.

Rank the proposals in terms of preference.

C A B D
A B C D
B C A D
D C B A

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