Information on four potential projects is given below: Projects ABCDInvestment required$(350,000)$(390,000)$(450,000)$(480,000)Present value of cash inflows535,000590,000670,000730,000Net present value$185,000200,000$220,000$250,000Ignore income taxesRequired:Compute the project profitability index for each project.Rank the projects in terms of preference.

Profitability index of Project = Present value of cash inflows/ Investment required.profitability…

Answered: Information on four potential projects…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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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