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Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project $ (420,000) 589,700 $ 169,700 5 years Investment Proposal C $ (170,000) 259,700 $ 89,700 B $ (200,000) 276,400 $ 76,400 7 years 6 years D $ (2,400,000) 3,203,000 $ 803,000 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. 6 years

Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project $ (420,000) 589,700 $ 169,700 5 years Investment Proposal C $ (170,000) 259,700 $ 89,700 B $ (200,000) 276,400 $ 76,400 7 years 6 years D $ (2,400,000) 3,203,000 $ 803,000 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. 6 years

Essentials Of Investments
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
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Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Answer is complete but not entirely correct. Investment Proposal A B C D Profitability Index Rank Preference 0.40 Second 0.38 Third 0.53 X First 0.33 X Fourth A $ (420,000) 589,700 $ 169,700 3333 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. ✓ 5 years Investment Proposal B $ (200,000) 276,400 $ 76,400 7 years $ (170,000) 259,700 $ 89,700 6 years D $ (2,400,000) 3,203,000 $ 803,000 6 years
Transcribed Image Text:Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Answer is complete but not entirely correct. Investment Proposal A B C D Profitability Index Rank Preference 0.40 Second 0.38 Third 0.53 X First 0.33 X Fourth A $ (420,000) 589,700 $ 169,700 3333 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. ✓ 5 years Investment Proposal B $ (200,000) 276,400 $ 76,400 7 years $ (170,000) 259,700 $ 89,700 6 years D $ (2,400,000) 3,203,000 $ 803,000 6 years
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