Question
Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (720,000 ) $ (160,000 ) $ (130,000 )
Information on four investment proposals is given below:
| Investment Proposal | ||||||||||||
| A | B | C | D | |||||||||
| Investment required | $ | (720,000 | ) | $ | (160,000 | ) | $ | (130,000 | ) | $ | (1,560,000 | ) |
| Present value of cash inflows | 1,013,000 | 221,800 | 198,900 | 2,081,400 | ||||||||
| Net present value | $ | 293,000 | $ | 61,800 | $ | 68,900 | $ | 521,400 | ||||
| Life of the project | 5 years | 7 years | 6 years | 6 years | ||||||||
Required:
1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.)
2. Rank the proposals in terms of preference.
Rank First, Second, Third or Fourth. Please specify for each proposal
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South Western Federal Taxation 2014 Comprehensive Volume
Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young
37th Edition
1285180925, 978-1285180922
