Question-1 | ||
1 | ||
Project Profitability Index = Net Present value/Investment required | ||
Investment Proposal | Project Profitability Index | |
A | 0.43 | =55600/130000 |
B | 0.38 | =53800/140000 |
C | 0.52 | =78600/150000 |
D | 0.33 | =421100/1260000 |
2 | ||
C A B D |
Question-2 | ||||
Operating cost of old machine | 13000 | |||
Less: Less operating cost of new machine | 6000 | |||
Less: Annual Depreciation | 5000 | =50000/10 | ||
Annual incremental net operating income | 2000 | |||
Cost of the new machine | 50000 | |||
Less: Salvage value of old machine | 20000 | |||
Initial investment | 30000 | |||
Simple rate of return | ||||
Choose Numerator: | / | Choose Denominator: | = | Simple rate of return |
Annual incremental net operating income | / | Initial investment | = | Simple rate of return |
2000 | / | 30000 | = | 6.7% |
Information on four investment proposals is given below: Investment required Present value of cash inflows $...
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