Walters Corporation has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows:

	Project	Investment Required	Net Present Value	Life of the Project (years)
	A.................	$168,400	$47,152	6
	B.................	$122,500	$39,200	14
	C.................	$86,000	$29,240	9
	D.................	$100,000	$37,000	2
	E..................	$134,000	$(9,380)	7

The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth.

Required:

1. Compute the profitability index for each project.

2. In order of preference, rank the five projects in terms of:

a. Net present value.

b. Project profitability index.

3. Which ranking do you prefer? Why?