Question
Exercise 13-5 Preference Ranking [LO13-5] Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (790,000 ) $
Exercise 13-5 Preference Ranking [LO13-5]
Information on four investment proposals is given below:
| Investment Proposal | ||||||||||||
| A | B | C | D | |||||||||
| Investment required | $ | (790,000 | ) | $ | (120,000 | ) | $ | (120,000 | ) | $ | (1,820,000 | ) |
| Present value of cash inflows | 1,121,300 | 168,300 | 182,000 | 2,427,200 | ||||||||
| Net present value | $ | 331,300 | $ | 48,300 | $ | 62,000 | $ | 607,200 | ||||
| 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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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
6th edition
978-0077400163
