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

Project Number

$1234$

Investment required $ $(270,000)$ $ $(450,000)$ $ $(360,000)$ $ $(480,000)$

Present value of cash inflows $336,140522,970433,400567,270$

Net present value $ $66,140$ $ $72,970$ $ $73,400$ $ $87,270$

Life of the project $6$ years $3$ years $12$ years $6$ years

Internal rate of return $18\%19\%14\%16\%$

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:

Compute the profitability index for each investment project.

Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return.