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