Problem 11-14B Preference Ranking of Investment Projects [LO11-3]

Bolingbrook Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:

Project	Investment Required	Net Present Value	Life of the Project (years)	Internal Rate of Return
A	$ 910,000	$ 265,850	6	19%
B	$ 700,000	$ 209,300	11	16%
C	$ 610,000	$ 130,350	6	17%
D	$ 830,000	$ 152,700	4	20%

The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, which to accept second, and so forth. The companys investment funds are limited.

Required:

1.

Compute the project profitability index for each project. (Round your answers to 2 decimal places.)

Project	Profitability Index
A
B
C
D

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2.

In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.

	Net Present Value	Project Profitability Index	Internal Rate of Return
First preference
Second preference
Third preference
Fourth preference

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