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:
- Compute the project profitability index for each project.
- Rank the projects in terms of preference.
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