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Information on four investment proposals is given below: A Investment required Net present value. $ (900,000) Present value of cash inflows 1,263,600 $363,600 Life of the project 5 years Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. B Investment Proposal C $ (90,000) 136,500 $ (170,000) 233,400 $ 63,400 $ 46,500 7 years 6 years D $ (1,430,000) 1,908,300 $478,300 6 years

Information on four investment proposals is given below: A Investment required Net present value. $ (900,000) Present value of cash inflows 1,263,600 $363,600 Life of the project 5 years Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. B Investment Proposal C $ (90,000) 136,500 $ (170,000) 233,400 $ 63,400 $ 46,500 7 years 6 years D $ (1,430,000) 1,908,300 $478,300 6 years

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Information on four investment proposals is given below: A B Investment required Net present value Life of the project Present value of cash inflows $ (900,000) 1,263,600 $ 363,600 $ (170,000) 233,400 $ 63,400 Investment Proposal C $ (90,000) 136,500 $ 46,500 5 years 7 years Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. Investment Profitability Proposal Index Rank Preference A B C D 6 years D $ (1,430,000) 1,908,300 $478,300 6 years
Transcribed Image Text:Information on four investment proposals is given below: A B Investment required Net present value Life of the project Present value of cash inflows $ (900,000) 1,263,600 $ 363,600 $ (170,000) 233,400 $ 63,400 Investment Proposal C $ (90,000) 136,500 $ 46,500 5 years 7 years Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. Investment Profitability Proposal Index Rank Preference A B C D 6 years D $ (1,430,000) 1,908,300 $478,300 6 years
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