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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Yancey Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:
| Project | Investment Required |
Net Present Value |
Life of the Project (years) |
Internal Rate of Return |
| A | $850,000 Â Â Â Â Â | $269,640 Â Â Â | 7 Â Â Â Â Â Â Â Â Â | 19% Â Â Â Â |
| B | $745,000 Â Â Â Â Â | $277,100 Â Â Â | 12 Â Â Â Â Â Â Â Â Â | 17% Â Â Â Â |
| C | $700,000 Â Â Â Â Â | $278,468 Â Â Â | 7 Â Â Â Â Â Â Â Â Â | 21% Â Â Â Â |
| D | $900,000 Â Â Â | $169,410 Â Â Â | 3 Â Â Â Â Â Â Â Â Â | 20% Â Â Â Â |
| Â | ||||
|
The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, which to accept second, and so forth. The companyAc€?cs investment funds are limited. |
| Required: | |
| 1. | Compute the project profitability index for each project. (Round your answers to 2 decimal places.) |
| Project | Profitability Index |
| A | Â Â Â Â Â |
| B | Â Â Â Â Â |
| C | Â Â Â Â Â |
| D | Â Â Â Â Â |
| Â | |
| 2. |
In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return. |
| Â | Net Present Value |
Project Profitability Index |
Internal Rate of Return |
| Â Â First preference | (Click to select)CBADÂ Â | (Click to select)CBADÂ Â | (Click to select)CDABÂ Â |
| Â Â Second preference | (Click to select)CBADÂ Â | (Click to select)CBADÂ Â | (Click to select)CDABÂ Â |
| Â Â Third preference | (Click to select)CBADÂ Â | (Click to select)CBADÂ Â | (Click to select)CDABÂ Â |
| Â Â Fourth preference | (Click to select)CBADÂ Â | (Click to select)CBADÂ Â | (Click to select)CDABÂ Â |
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