Information on four investment proposals is given below Inve

Information on four investment proposals is given below Investment Proposal Investment required S (420,000) (200,000) $(170,000) (2,400,000) Present value of cash inflows Net present value Life of the project 589,700276,400 259,700 3,203,000 $ 169,700 $76.400 $ 89,700 $ 803,000 6 years 5 years7 years6 years Required 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) bject Investment Profitability Proposal Index 2 Rank the proposals in terms of preference OABCD ? BCAD CABD ODCBA

Solution

1 Project Profitability index A 0.40 =169700/420000 B 0.38 =76400/200000 C 0.53 =89700/170000 D 0.33 =803000/2400000 2 C A B D