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.

Investment Proposal	Project Profitability Index	Rank Preference
A
B
C
D