Senior management at ACME faces four potential investment opportunities. ACME is currently operating in a "capital-constrained" environment. Rank the four investment projects according to NPV, IRR and profitability index. Which criteria do you use to make your recommendation and why? EXPLAIN.

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2 3 Funds Needed $960,000 $720,000 $540,000 $900,000 Present Value of Cash inflows $1,134,540 $866,800 $672,280 $1,045,940 Net Present Value $174,540 $146,800 $132,280 $145,940 Project Life 6 years 12 years 6 years 3 years Internal Rate of Return (IRR) 16% 14% 18% 19% 2 3 Funds Needed $960,000 $720,000 $540,000 $900,000 Present Value of Cash inflows $1,134,540 $866,800 $672,280 $1,045,940 Net Present Value $174,540 $146,800 $132,280 $145,940 Project Life 6 years 12 years 6 years 3 years Internal Rate of Return (IRR) 16% 14% 18% 19%

Answer rating: 100% (QA)

To rank the four investment projects according to NPV IRR and profitability index we will consider each criterion individually 1 Net Present Value NPV ... View the full answer