Question
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
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:
Net The Internal
Investment Present Project Rate Of
Project Required Value In Yrs. Return
1. 80,000 210,000 6 13%
2. 750,000 340,000 10 17%
3. 845,000 333,000 7 12%
4. 695,000 202,000 5 18%
A. Compute the project profitability index for each project.
B. Rank the four projects in order of preference in terms of:
Internal rate Of Return
Project Profitability Index
Net Value
C. Which of the three rankings above do you prefer?
What are the strengths and weaknesses of each method?
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