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Norwich Manufacturing is considering three capital investment proposals. At this time, the company has funds available to pur
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Answer #1
A B C
Present value of net cash inflows 1,685,000 1,950,000 2,220,000
Investment -1,348,000 -1,875,000 -2,000,000
Profitiablity Index 1,685,000/1,348,000 = 1.25 1,950,000/1,875,000 = 1.04 2,220,000/2,000,000 = 1.11
Rank 1 3 2

Investment in equipment A should me made since it has highest profitability index.

Kindly comment if you need further assistance.

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