Question: Information on four potential projects is given below: Projects A B C D Investment required $(350,000) $(390,000) $(450,000) $(480,000) Present value of cash inflows 535,000

Information on four potential projects is given below:

Projects

A

B

C

D

Investment required

$(350,000)

$(390,000)

$(450,000)

$(480,000)

Present value of cash inflows

535,000

590,000

670,000

730,000

Net present value

$185,000

200,000

$220,000

$250,000

Ignore income taxes

Required:

  1. Compute the project profitability index for each project.
  2. Rank the projects in terms of preference.

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