The management of Revco Products is exploring four different investment opportunities. Information on the four...
60.1K
Verified Solution
Link Copied!
Question
Accounting
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
$(472,000)
$(356,000)
$(273,000)
$(448,000)
Present value of Cash inflows at a 10% discount rate
528,640
430,760
327,600
506,240
Net present value
$56,640
$74,760
$54,600
$58,240
Life of the project
6 years
3 years
12 years
6 years
Internal rate of return
8%
7%
18%
19%
The company's required rate of return is 10%; thus, a 10% 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.
Requirement 1:
Compute the project profitability index for each investment project. (Round your answers to 2 decimal places.)
Project
Profitability index
1
2
3
4
Requirement 2:
Rank the four projects according to 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
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
