PROBLEM 14-21 Preference Ranking of Investment Projects LO14-5 Revco Products is exploring the following four investment opportunities: Project Number 1 2 3 4 Investment required Present value of cash inflows Net present value $(270,000) 336,140 $ 66,140 Life of the project Internal rate of return 6 years 18% $(450,000) 522,970 $ 72,970 3 years 19% $(360,000) 433,400 $ 73,400 12 years 14% $(480,000) 567,270 $ 87,270 6 years 16% The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so the company can't accept all of the available projects. Required: 1. Compute the profitability index for each investment project. 2. Rank the four projects according to preference, in terms of: a. Net present value b. Profitability index c. Internal rate of return 3. Which ranking do you prefer? Why?