Information on four investment proposals is given below Investment Proposal Inve

Question

Information on four investment proposals is given below Investment Proposal Investment required Present value of cash inflows $ (150,000) $ (80,000) $ (160,000) $ (910,000) 110,400 241,600 211,800 1,214,500 Net present value $ 61,800 $ 30,400 $ 81,600 $ 304,500 Life of the project years 7 years 6 years 6 years Required 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) Investment Profitability Project Proposal Index 2. Rank the proposals in terms of preference. ABCD DC BA BCAD CABD

Explanation / Answer

1 Project Profitability index A 0.41 =61800/150000 B 0.38 =30400/80000 C 0.51 =81600/160000 D 0.33 =304500/910000 2 C A B D

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