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

Project Number1234Investment required$ (270,000) $ (450,000) $ (360,000) $ (480,000) Present value of cash inflows336,140 522,970 433,400 567,270 Net present value$ 66,140 $ 72,970 $ 73,400 $ 87,270 Life of the project6years3years12years6yearsInternal rate of return18% 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 cant 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.