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 profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
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 profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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) | ||||
| 480,000 | 56,500 | 286,700 | 3,178,500 | |||||
| $ 150,000 | $ 16,500 | $ 96,700 | $ 798,500 | |||||
| Life of the project | 5 | years | 7 | years | 6 | years | 6 | years |
Required:
1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.)
2. Rank the proposals in terms of preference.
Transcribed Image Text:Investment
Proposal
A
B
C
D
Profitability
Index
Rank
Preference
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