Bolingbrook Company has limited funds available for investment and must ration t

Question

Bolingbrook Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:

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, which to accept second, and so forth. The company’s investment funds are limited.

Compute the project profitability index for each project. (Round your answers to 2 decimal places.)

2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.

Project Investment
Required Net
Present
Value Life of
the
Project
(years) Internal
Rate
of Return A $880,000       $434,360     7           24%      B $685,000       $371,170     12           20%      C $580,000       $223,220     7           21%      D $780,000     $165,060     3           22%     

Explanation / Answer

Bolingbrook Company has limited funds available for investment and must ration t

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