The management of Revco Products is exploring four different investment opportunities.nformation on the four projects under study follows:Project Number2Investment requiredPresent value of cash inf lows at a$(560,000)$(510,000) $(410,000)$(35111% discount rate592,636$ 32,636577,822$ 67,822452,691$ 42,691441Net present valueLife of the project6 years13%12 years6 years3Internal rate of return14%15%Because the company's required rate of return is 11%, a 11% discount rate has been usedn the present value computations above. Limited funds are available for investment, sohe company can't accept all of the available projects.Required:1. Compute the project profitability index for each investment project.2. Rank the four projects according to preference, in terms of net present value, projectprofitability index and internal rate of return.Complete this question by entering your answers in the tabs below.Required 1Required 2Compute the project profitability index for each investment project. (Round your answers to 2ProfitabilityProjectIndex1234

Profitability index is the ratio of present value of cash flow to the initial investment and it must…

1. 3. Envestment required Present value of cash inflows at a $(560,000) $(510,000) $(410,000) $(350 11% discount rate 592,636 577,822 $ 67,822 452,691 $ 42,691 441 let present value Life of the project Internal rate of return $ 32,636 $ 9 6 years 13% 12 years 6 years 3 14% 15% 140/ 119/

1. 3. Envestment required Present value of cash inflows at a $(560,000) $(510,000) $(410,000) $(350 11% discount rate 592,636 577,822 $ 67,822 452,691 $ 42,691 441 let present value Life of the project Internal rate of return $ 32,636 $ 9 6 years 13% 12 years 6 years 3 14% 15% 140/ 119/

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

The management of Revco Products is exploring four different investment opportunities.
nformation on the four projects under study follows:
Project Number
2
Investment required
Present value of cash inf lows at a
$(560,000)
$(510,000) $(410,000)
$(351
11% discount rate
592,636
$ 32,636
577,822
$ 67,822
452,691
$ 42,691
441
Net present value
Life of the project
6 years
13%
12 years
6 years
3
Internal rate of return
14%
15%
Because the company's required rate of return is 11%, a 11% discount rate has been used
n the present value computations above. Limited funds are available for investment, so
he company can't accept all of the available projects.
Required:
1. Compute the project profitability index for each investment project.
2. Rank the four projects according to preference, in terms of net present value, project
profitability index and internal rate of return.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Compute the project profitability index for each investment project. (Round your answers to 2
Profitability
Project
Index
1
2
3
4

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