Exercise 14-5 (Algo) Preference Ranking [LO14-5]Information on four investment proposals is given below:Investment requiredPresent value of cash inflowsNet present valueLife of the projectInvestment ProfitabilityProposalIndexABUDВсD$ (280,000)393,900$ 113,900Required:1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.)2. Rank the proposals in terms of preference.RankPreference.5 yearsInvestment ProposalC$ (50,000)78,100$28,100B$ (140,000)192,800$ 52,8007 years6 yearsD$ (780,000)1,038, 100$ 258, 1006 years.

formation on four investment proposals is given below: Investment required Present value of cash inflows Net present value. Life of the project Required: A $ (280,000) 393,900 $ 113,900 5 years Investment B $ (140,000) 192,800 $52,800 7 years

formation on four investment proposals is given below: Investment required Present value of cash inflows Net present value. Life of the project Required: A $ (280,000) 393,900 $ 113,900 5 years Investment B $ (140,000) 192,800 $52,800 7 years

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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Question

Exercise 14-5 (Algo) Preference Ranking [LO14-5]
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
BUD
В
с
D
$ (280,000)
393,900
$ 113,900
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.
Rank
Preference.
5 years
Investment Proposal
C
$ (50,000)
78,100
$28,100
B
$ (140,000)
192,800
$ 52,800
7 years
6 years
D
$ (780,000)
1,038, 100
$ 258, 100
6 years.

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