Shaylee Corp has $2.10 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Project AProject BProject CProject DInitial investment$720,000$400,000$960,000$1,115,000Present value of future cash flows 935,000 500,000 1,650,000 1,310,000 Required:1. Is Shaylee able to invest in all of these projects simultaneously?multiple choiceNoYes 2-a. Calculate the profitability index for each project. (Round your answers to 4 decimal places.)

Given information is: Initial investment in total = $2.10 million Some projects options are given.Total initial investment is required if the business accepts all the projects = 720,000 + 400,000 + 960,000 + 11,15,000 = = $31,95,000 But total available amount is $2.10 million. So, Shaylee will not be able to invest in all of these projects simultaneously.Profitability Index = Present value of cash inflows / Initial investment For A: P.I. = 935000/720000 = 1.2986 For B: P.I. = 500000/400000 = 1.25 For C: P.I. = 16,50,000/ 960,000 = 1.7188 For D: P.I.= 13,10,000/ 11,15,000 = 1.1749

Answered: Is Shaylee able to invest in all of…

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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Shaylee Corp has $2.10 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows:

	Project A	Project B	Project C	Project D
Initial investment	$	720,000	$	400,000	$	960,000	$	1,115,000
Present value of future cash flows		935,000		500,000		1,650,000		1,310,000

Required:
1. Is Shaylee able to invest in all of these projects simultaneously?

multiple choice

2-a. Calculate the profitability index for each project. (Round your answers to 4 decimal places.)

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