Information on four investment proposals is given below:Investment required.Present value of cash inflowsNet present value.Life of the projectInvestment Profitability.IndexProposalA8CDA$ (790,000)1,121,300$ 331,300RankPreference5 yearsRequired:1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.)2. Rank the proposals in terms of preference.Investment Proposal$ (120,000)182,000$ 62,000B$ (120,000)168,300$ 48,3007 years6 yearsD$ (1,820,000)2,427,200$ 607,2006 years

SOLUTION : -1. Calculation of the profitability index for each investment proposal : -…

Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Investment Profitability Proposal Index A B C D A $ (790,000) 1,121,300 $ 331,300 Rank Preference 5 years Investment Proposal C $ (120,000) 182,000 $ 62,000 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. B $(120,000) 168,300 $ 48,300 7 years D $ (1,820,000) 2,427,200 $ 607,200 6 years

Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Investment Profitability Proposal Index A B C D A $ (790,000) 1,121,300 $ 331,300 Rank Preference 5 years Investment Proposal C $ (120,000) 182,000 $ 62,000 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. B $(120,000) 168,300 $ 48,300 7 years D $ (1,820,000) 2,427,200 $ 607,200 6 years

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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