FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Dineshbhai 

Information on four investment proposals is given below.
A
Investment required
Net present value
Present value of cash inflows
$ (190,000)
267,400
$ 77,400
Life of the project
5 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
B
Investment Proposal
$ (180,000)
249,400
$ 69,400
7 years
C
$ (170,000)
259,300
$ 89,300
6 years
D
$ (900,000)
1,197,500
$ 297,500
6 years
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Transcribed Image Text:Information on four investment proposals is given below. A Investment required Net present value Present value of cash inflows $ (190,000) 267,400 $ 77,400 Life of the project 5 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 B Investment Proposal $ (180,000) 249,400 $ 69,400 7 years C $ (170,000) 259,300 $ 89,300 6 years D $ (900,000) 1,197,500 $ 297,500 6 years
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