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Question(s) / Instruction(s):

Information on four investment proposals is given below:

Investment Proposal

                                  A         B         C              D

Investment required              $(85,600)       $(201,000)       $(98,000)       $(174,000) 

Present value of cash inflows   121,600          256,000          146,000            229,000  

Net present value                  $36,000           $55,000          $48,000            $55,000  

Life of the project                  8 years              7 years          6 years             6 years  

Requirement 1:

Compute the project profitability index for each investment proposal.

Requirement 2:

Rank the proposals in terms of preference.

a)           D C B A

b)            C A D B

c)            A B C D

d)            B C A D

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