Information on four investment proposals is given below:
|
|
Investment Proposal
|
|
A |
B |
C |
D |
| Investment required |
$ |
(85,000) |
$ |
(200,000) |
$ |
(90,000) |
$ |
(170,000) |
| Present value of cash inflows |
|
119,000 |
|
250,000 |
|
135,000 |
|
221,000 |
|
|
|
|
|
|
|
|
|
| Net present value |
$ |
34,000 |
$ |
50,000 |
$ |
45,000 |
$ |
51,000 |
|
|
|
|
|
|
|
|
|
| Life of the project |
|
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.)
| Proposal |
Project
Profitability
Index |
| A |
|
| B |
|
| C |
|
| D |
|
|
| 2. |
Rank the proposals in terms of preference.
|
|
|
|
|
A B C D |
|
D C B A |
|
C A D B |
|
B C A D |
|