Information on four investment proposals is given below Investment Proposal Inve

Question

Information on four investment proposals is given below Investment Proposal Investment required S (330,000) $ (40,000) $(190,000) $ (2,380,000) 56,500 286,700 3,178,500 Present value of cash inflows Net present value Life of the project 480,000 $ 150,000 $16,500 $ 96,700 $ 798,500 years years6 years b years Required 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) Project Investment Profitability Proposal Index 0.45 0.41 0.51 0.34

Explanation / Answer

PI=Present value of inflows/Present value of outflows

PI A (480,000/330,000)=1.45 B (56500/40,000)=1.41 C (286700/190,000)=1.51 D (3178500/2380,000)=1.34

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