Question
Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (90,000) $ (100,000) $ (70,000) $ (120,000) Present
Information on four investment proposals is given below:
| Investment Proposal | ||||||||
|---|---|---|---|---|---|---|---|---|
| A | B | C | D | |||||
| Investment required | $ (90,000) | $ (100,000) | $ (70,000) | $ (120,000) | ||||
| Present value of cash inflows | 126,000 | 138,000 | 105,000 | 160,000 | ||||
| Net present value | $ 36,000 | $ 38,000 | $ 35,000 | $ 40,000 | ||||
| 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.
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Managerial Accounting
Authors: Harold M. Sollenberger, Arnold Schneider, Lane K. Anderson
9th Edition
0538842822, 978-0538842822
