Beck Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of $1,920,000. Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,800,000. The following information is available:

	Indiana proposal	Kentucky proposal
Required investment	$1,920,000	$2,800,000
Estimated life	9 years	9 years
Estimated residual value	$80,000	$50,000
Estimated annual cash inflows over the next 9 years	$100,000	$700,000
Required rate of return	9%	9%

The payback period for the Indiana proposal is closest to

A.

19.20 years

B.

4.00 years

C.

24.00 years

D.

96.00 years

2.

ABC Company has three potential projects from which to choose. Selected information on each of the three projects follows:

	Project A	Project B	Project C
Investment required	$40,000	$54,500	$53,300
Net present value of project	$49,300	$74,900	$69,600

Using the profitability index, rank the projects from most profitable to least profitable.

A.

B, C, A

B.

C, B, A

C.

A, B, C

D.

B, A, C