Question

Jill Harrington, a manager at Jennings Company, is considering several potential capital investment projects. Data on these projects follow: mont Alcanows PV of Cansin 25.600 Required: 1. Compute the payback period for each project and rank order them based on this criterion (Round your answers to 2 decimal places.) Puck Period Run ProyectX PY Project 2. Compute the NPV of each project and rank order them based on this criterion. NPV Rank Project X Project 3. Compute the profitability index of each project and rank order them based on this criterion. (Round your answers to 2 decimal places.)

Answer 1

computation of the pay back period for each project and rank order them based on this criterion: Formula for Payback period = Initial investment/ annual cashflows Computation Payack period Rank Project X $40,000 / $25,000 Project y $20,000/$10,000 Project Z $50,000/$25,400 Compute the NPV of each project and rank order them based on their criterion : Formula for NPV = PV of cash flows - initial investment Computation Payack period Rank Project X $45,000 - $40,000 $ 5,000.00 Project y $33,000 - $20,000 $ 13,000.00 Project Z $70,000 - $50,000 $ 20,000.00 3.) Compute the profitaility index of each project and rank order them based on this criterion : Formula for profitability index = pv of cash flows / initial investment Computation Payack period Rank Project X $45,000 / $40,000 1.125 Project y $33,000/$20,000 1.65 Project Z $70,000/$50,000 1.40