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Exercise 13-5 Preference Ranking [LO13-5]
Information on four investment proposals is given below:
| | | Investment Proposal | |
| | A | B | C | D |
| Investment required | $ | (130,000 | ) | $ | (140,000 | ) | $ | (150,000 | ) | $ | (1,260,000 | ) |
| Present value of cash inflows | | 185,600 | | | 193,800 | | | 228,600 | | | 1,681,100 | |
| Net present value | $ | 55,600 | | $ | 53,800 | | $ | 78,600 | | $ | 421,100 | |
| Life of the project | | 5 years | | | 7 years | | | 6 years | | | 6 years | |
| |
Required:
1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.)
2. Rank the proposals in terms of preference.
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