Business, 22.05.2020 04:01, slixmaster89

The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:

Project number
1 2 3 4
Investment required $(500,000) $(450,000) $(220,000) $(470,000)
Present value of cash inflows at 12% discount rate 568,080 522,000 266,400 616,650
Net present value $ 86,060 $72,000 $46,400 $146,650
Life of the project 9 years 18 years 9 years 6 years
Internal rate of return 16% 15% 17% 22%
Because the company's required rate of return is 12%, a 12% discount rate has been used in the present value computations above. Limited funds are available for investment, so the company can't accept all of the available projects.

Required:

1. Compute the project profitability index for each investment project. (Round your answers to 2 decimal places.)

Project Profitability Index
1
2
3
4
2. Rank the four projects according to the preference, in terms of net present value, project profitability index and internal rate of return.

Net Present Value Project Profitability Index Internal Rate of Return
First preference
Second preference
Third preference
Fourth preference

Answers: 2

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The management of Revco Products is exploring four different investment opportunities. Information o...