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The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows: Project Number 1 2 Investment required
The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows: Project Number 1 2 Investment required $ (270,000) $ (450,000) Present value of cash inflows 336,140 Net present value Life of the project Internal rate of return $66,140 6 years 184 522,970 $72,970 $ (360,000) 433,400 $ 73,400 $ (480,000) 567,270 $ 97,270 3 years 194 12 years 14 6 years 168 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 net present value, profitability index, and internal rate of return. Complete this question by entering your answers in the tabs below. Required 11 Required 2 Compute the profitability index for each investment project. (Round your answers to 2 decimal places.) Project Profitability 1 2 3 Index A
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