Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The management of Revco Products is exploring four different Investment opportunities. Information on the four projects under study follows: Project Number $(270,000) $ (450,000) $

image text in transcribed

image text in transcribed

The management of Revco Products is exploring four different Investment opportunities. Information on the four projects under study follows: Project Number $(270,000) $ (450,000) $ (360,000) $(480,000) Investment required Present value of cash inflows at a 10% discount rate Net present value Life of the project Internal rate of return $ 326, 140 66,140 6 years $ 522,970 72,970 3 years 19% 433,400 $ 73,400 12 years 5 67,270 $ 87,270 6 years 16% Because the company's required rate of return is 10%, a 10% discount rate has been used in the present value computations above. Limited funds are available for Investment, so the company can't accept all of the available projects. Required: 1. Compute the project profitability Index for each investment project. 2 Rank the four projects according to preference, in terms of net present value, project profitability Index and Internal rate of return. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the project profitability index for each investment project. (Round your answers to 2 decimal places.) Project Profitability Index 0.24 2 0.16 0.20 0.18 Required 1 Required 2 Rank the four projects according to preference, in terms of net present value, project profitability index and internal rate of return. Net Present Value Project Profitability Index Internal Rate of Return First preference Second preference Third preference Fourth preference 1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Concepts And Applications

Authors: K. Fred Skousen, James D. Stice, Earl Kay. Stice, W. Steve Albrecht

7th Edition

0538876255, 978-0538876254

More Books

Students also viewed these Accounting questions

Question

Tell me about yourself.

Answered: 1 week ago

Question

Explain the importance of Human Resource Management

Answered: 1 week ago

Question

Discuss the scope of Human Resource Management

Answered: 1 week ago

Question

Discuss the different types of leadership

Answered: 1 week ago

Question

Write a note on Organisation manuals

Answered: 1 week ago