Question
Exercise 13-5 Preference Ranking [LO13-5] Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (130,000 ) $
Exercise 13-5 Preference Ranking [LO13-5]
Information on four investment proposals is given below:
| Investment Proposal | ||||||||||||
| A | B | C | D | |||||||||
| Investment required | $ | (130,000 | ) | $ | (140,000 | ) | $ | (150,000 | ) | $ | (1,260,000 | ) |
| Present value of cash inflows | 185,600 | 193,800 | 228,600 | 1,681,100 | ||||||||
| Net present value | $ | 55,600 | $ | 53,800 | $ | 78,600 | $ | 421,100 | ||||
| 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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Financial Accounting An Integrated Approach
Authors: Michael Gibbins
6th Edition
0176407251, 978-0176407254
