Exercise 13-4 Preference Ranking [LO4]
| 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 | .40  |
| B | .25 |
| C | .50 |
| D | .30 |
| | |
| 2. |
Rank the proposals in terms of preference.
|
D C B A  |
2.Is C A D B
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