Newago, Inc. is strapped for cash for investment projects and must decide which of four projects it will fund.Below are the projects and information about them:

Life of

NettheInternal

InvestmentPresentProjectRate of

ProjectRequiredValuein YearsReturn

1$80,000$210,000613%

2$750,000$340,0001017%

3$845,000$333,000712%

4$695,000$202,000518%

Required

Compute the project profitability index for each project.

Rank the four projects in order of preference in terms of :

Internal rate of return

Project profitability index

Net present value.

Which of the three rankings above do you prefer? Why? What are the strengths and weaknesses of each method?