Question

compute and rank investment proposals

Exercise 7-5 (Algo) Preference Ranking (L07-5) Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Investment Proposal D $(280,000) S(149,880) (50,000) (780,000) 393,900 192,800 78,100 1,038, 100 $ 113,900 $ 52,800 $ 28,100 $ 258,100 5 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.) 2. Rank the proposals in terms of preference. Investment Profitability Project Rank Preference Proposal Index

Answer 1

solution B C $258100 $ 28100 $52800 $780 000 $140000 $ 50000 particulars A Net present value (a) #113900 lavestment required (6) $280000 project profitability Inden (46) 0.41 Parking and 0.56 0.33 0.38 good ats highest repr, but it ranks third in terny * Note that of project project D has the profitability Inder. Thanks