Newago, Inc. is strapped for cash for investment projects andmust decide which of four projects it will fund. Below are theprojects and information about them:
Life Of:
Net The Internal
Investment Present Project Rate Of
Project Required Value In Yrs. Return
1. 80,000 210,000 6 13%
2. 750,000 340,000 10 17%
3. 845,000 333,000 7 12%
4. 695,000 202,000 5 18%
A. Compute the project profitability index for each project.
B. Rank the four projects in order of preference in termsof:
Internal rate Of Return
Project Profitability Index
Net Value
C. Which of the three rankings above do you prefer?
What are the strengths and weaknesses of eachmethod?
