Compute the project profitability index for each investment

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Reference no: EM131756869

Problem - Information on four investment proposals is given below:

 

Investment Proposal

 

A

B

C

D

Investment required

$(330,000)

$(40,000)

$(190,000)

$(2,380,000)

Present value of cash inflows

480,000

56,500

286,700

3,178,500

Net present value

$150,000

$16,500

$96,700

798,500

Life of the project

5 years

7 years

6 years

6 years

Required:

1. Compute the project profitability index for each investment proposal.

2. Rank the proposals in terms of preference.

Reference no: EM131756869

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