Ivanhoe Manufacturing is evaluating two capital projects. The company's choice will be based on the profitability index.Project #1 has a present value of cash flows of $216,000 and a net initial investment of $194,400 while Project #2 has apresent value of future cash flows of $885,600 and a net initial investment of $864,000.Click here to view the factor table.Using the present value tables, which project will Ivanhoe choose? (Round answers to 3 decimal places, e.g. 2.575.)Project #1Project #2Profitability IndexIvanhoe should choosesince its profitability index is* than the profitability index of

Profitability Index: The profitability index is a measure of an investment or project's…

Using the present value tables, which project will Ivanhoe choose? (Round answers to 3 decimal places, e.g. 2.575.) Project #1 Project #2 Profitability Index Ivanhoe should choose • since its profitability index is * than the profitability index of

Using the present value tables, which project will Ivanhoe choose? (Round answers to 3 decimal places, e.g. 2.575.) Project #1 Project #2 Profitability Index Ivanhoe should choose • since its profitability index is * than the profitability index of

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Ivanhoe Manufacturing is evaluating two capital projects. The company's choice will be based on the profitability index.
Project #1 has a present value of cash flows of $216,000 and a net initial investment of $194,400 while Project #2 has a
present value of future cash flows of $885,600 and a net initial investment of $864,000.
Click here to view the factor table.
Using the present value tables, which project will Ivanhoe choose? (Round answers to 3 decimal places, e.g. 2.575.)
Project #1
Project #2
Profitability Index
Ivanhoe should choose
since its profitability index is
* than the profitability index of

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