Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows Proiect Number Investment reqquired Present value
The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows Proiect Number Investment reqquired Present value of cash inflows at a (400,000) (530,000) (380,000) (350,000) 555,983 155,983 6 years 416,092 155,797 $ 36,092 6 years 685,797 8% discount rate Net present value Life of the project 463,966 113,966 3 years 12 years Internal rate of return 20% 13% 11% 25% Because the company's required rate of return is 8%, a 8% 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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started