Managerial Accounting
Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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D

Information on four investment proposals is given below:
Investment Proposal
C
$ (70,000)
105,000
$ 35,000
6 years
D
$ (120,000)
160,000
$ 40,000
6 years
A
B
Investment required
Net present value.
Present value of cash inflows
$ (90,000)
126,000
$ 36,000
$ (100,000)
138,000
$ 38,000
Life of the project
5 years
7 years
Required:
1. Compute the profitability index for each investment proposal.
Note: Round your answers to 2 decimal places.
2. Rank the proposals in terms of preference.
Investment Profitability
Proposal
Index
Rank
Preference
A
B
C
D
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Transcribed Image Text:Information on four investment proposals is given below: Investment Proposal C $ (70,000) 105,000 $ 35,000 6 years D $ (120,000) 160,000 $ 40,000 6 years A B Investment required Net present value. Present value of cash inflows $ (90,000) 126,000 $ 36,000 $ (100,000) 138,000 $ 38,000 Life of the project 5 years 7 years Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. Investment Profitability Proposal Index Rank Preference A B C D
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