Austin Company is investigating five different investment opportunities. Information on the four projects under study is given below:

Since the company€™s required rate of return is 10%, a 10% discount rate has been used in the present value computations above. Limited funds are available for investment, so the 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:
a. Net present value
b. Project profitability index
c. Internal rate of return
3. Which ranking do you prefer?Why?

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Project Number 3 4 Present value of cash inflows at a 10% discount rate. Net present value Life of the project 567,270 $ 87,270 6 years 433.400 336,140 522,970 73,400 S 66,140 72,970 6 years 12 years 1496 3 years 19% Internal rate of return 16% 18%