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Jill Harrington, a manager at Jennings Company, is considering several potential capital investment projects. Data on these projects follow: Project X Project Y Project Z
Jill Harrington, a manager at Jennings Company, is considering several potential capital investment projects. Data on these projects follow:
| Project X | Project Y | Project Z | |
|---|---|---|---|
| Initial investment | $ 40,000 | $ 20,000 | $ 50,000 |
| Annual cash inflows | 25,000 | 10,000 | 25,400 |
| PV of cash inflows | 45,000 | 33,000 | 70,000 |
Required:
Compute the payback period for each project and rank order them based on this criterion.
Compute the NPV of each project and rank order them based on this criterion.
Compute the profitability index of each project and rank order them based on this criterion.
If Jennings has limited funds to invest, which ranking should Jill recommend?
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