The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:
Project Number
Investment required $ $ $ $
Present value of cash inflows
Net present value $ $ $ $
Life of the project years years years years
Internal rate of return
The net present values above have been computed using a discount rate. Limited funds are available for investment, so the company cant accept all of the available projects.
Required:
Compute the profitability index for each investment project.
Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return.
