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Information on four investment proposals is provided below: Investment Proposal A B C D Investment required $ (45,000 ) $ (50,000 ) $ (35,000 )
Information on four investment proposals is provided below:
Investment Proposal | |||||||||||||||
A | B | C | D | ||||||||||||
Investment required | $ | (45,000 | ) | $ | (50,000 | ) | $ | (35,000 | ) | $ | (60,000 | ) | |||
Present value of cash inflows | 65,000 | 45,000 | 53,000 | 80,000 | |||||||||||
Net present value | $ | 20,000 | $ | (5,000 | ) | $ | 18,000 | $ | 20,000 | ||||||
Life of the project | 5 years | 7 years | 6 years | 8 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.
multiple choice
D C B A
B C A D
C A D B
A B C D
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