Question
Norwood, Inc., which has a hurdle rate of 14%, is considering three different independent investment opportunities. Each project has a seven-year life. The annual cash
| Norwood, Inc., which has a hurdle rate of 14%, is considering three different independent investment opportunities. Each project has a seven-year life. The annual cash flows and initial investment for each of the projects are as follows: (Future Value of $1, Present Value of $1, Future Value Annuity of $1,Present Value Annuity of $1.) |
| Project A | Project B | Project C | |
| Annual cash flows | $131,570 | $120,620 | $109,660 |
| Initial investment | 321,000 | 301,000 | 231,000 |
| a. | What is the present value of the annual cash flows for each of the three projects? (Round "PV Factor" to 4 decimal places. Round your answers to the nearest dollar amount.) |
| b. | What is the net present value of each of the projects? (Round "PV Factor" to 4 decimal places. Round your intermediate calculations and final answers to the nearest dollar amount.) |
| c. | What is the profitability index of each of the projects? (Round "PV Factor" to 4 decimal places. Round the intermediate calculation to the nearest dollar amount. Round your answers to 2 decimal places.) |
| d. | In what order should Norwood prioritize investment in the projects? | ||||||
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