Information on four investment projects being investigated by Clenning Company is as follows:

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. IRR.
3. Which ranking do you prefer? Why?

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Project Number 3 2 $(450,000) Investment required ... Present value of cash inflows at a 10% discount rate.. Net present value..... Life of the project.. Internal rate of return. $(360,000) $(270,000) S(480,000) 522,970 $ 72,970 433,400 $ 73,400 12 years 336,140 $ 66,140 6 years 567,270 $ 87,270 6 years 3 years 19% 18% 14% 16%