Investment Proposal
A B C D
Investment required $(85,000) $(200,000) $(90,000) $(170,000)
Present value of cash flows 119,000 250,000 135,000 221,000
Net present value $34,000 $50,000 $45,000 $51,000
Life of the project 5 years 7 years 6 years 6 years
Required:
a. Compute the project profitability index for each investment proposal.
b. Rank the proposals in terms of preference.