Ranking projects

Projects

1234

Investment required480,000360,000270,000450,000

PV of CI at 10% discount Rate567,270433,400 336,140 522,970

Life of the project6 years12 years6 years3 years

IRR16%14%18%19%

Because the company's required rate of return is 10%, a 10% discount rate has been used in the above PV computations.Limited funds are available for investment, so the company cant accept all of the available projects.

Required:

1.Compute the projects NPV and Profitability index.

2.Rank the projects according to preference, in terms of:

a.NPV

b.Project profitability index

c.IRR