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Preference Ranking Information on four investment proposals is given below: Investment Proposal A B C D Investment required $(85,000) $(200,000) $(90,000) $(170,000) Present value of
Preference Ranking
Information on four investment proposals is given below:
Investment Proposal
A B C D
Investment required $(85,000) $(200,000) $(90,000) $(170,000)
Present value of cash flows 119,000 250,000 135,000 221,000
Net present value $34,000 $50,000 $45,000 $51,000
Life of the project 5 years 7 years 6 years 6 years
Required:
- Compute the project profitability index for each investment proposal.
- Rank the proposals in terms of preference.
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