The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:

	Project 1	Project 2	Project 3	Project 4
Investment required	$(270,000)	$(450,000)	$(360,000)	$(480,000)
Present value of cash at inflows at 10% discount rate	336,140	522,970	433,400	567,270
Net present value	$66,140	$72,970	$73,400	$82,270
Life of the project	6 years	3 years	12 years	6 years
Internal rate of return	18%	19%	14%	15%

Because of the companys required rate of return is 10%, 1 10% discount rate has been used in the present, value computations above. Limited funds are available for investment, so the company cant accept all of the available projects.

Required:

• compute the project profitability index for each investment project.
• Rank the four projects according to preference, in terms of:
  • Net present value
  • Project profitability index
  • Internal rate of return
• Which ranking do you prefer? Why?