Investment required Present value of cash inflows Net present value Life of the project Internal rate of return 1 $ (270,000) 336,140 $ 66,140 Required 1 Required 2 6 years 18% 2 $ (450,000) 522,970 $ 72,970 Compute the profitability index for each investment project. Note: Round your answers to 2 decimal places. Project Number 3 years 19% 3 $ (360,000) 433,400 $ 73,400 12 years. 14% 4 $ (480,000) 567,270 $ 87,270 The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so the company can't accept all of the available projects. Required: 1. Compute the profitability index for each investment project. 2. Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return. Complete this question by entering your answers in the tabs below. 6 years 16%
Investment required Present value of cash inflows Net present value Life of the project Internal rate of return 1 $ (270,000) 336,140 $ 66,140 Required 1 Required 2 6 years 18% 2 $ (450,000) 522,970 $ 72,970 Compute the profitability index for each investment project. Note: Round your answers to 2 decimal places. Project Number 3 years 19% 3 $ (360,000) 433,400 $ 73,400 12 years. 14% 4 $ (480,000) 567,270 $ 87,270 The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so the company can't accept all of the available projects. Required: 1. Compute the profitability index for each investment project. 2. Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return. Complete this question by entering your answers in the tabs below. 6 years 16%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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