The management of Revco Products is exploring four different investment opportun

Question

The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:

Project Number

Because the company’s required rate of return is 8%, a 8% 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.

Compute the project profitability index for each investment project. (Round your answers to 2 decimal places.)

Rank the four projects according to preference, in terms of net present value, project profitability index and internal rate of return.

The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:

Explanation / Answer

Particulars Project Number 1 2 3 4 Investment required $        -4,50,000.00 $        -5,40,000.00 $         -3,90,000.00 $         -4,20,000.00 Present value of cash inflows at a 8% discount rate   $         6,24,720.00 $          6,18,300.00 $          6,24,720.00 $          4,96,800.00 Net present value $         1,74,720.00 $             78,300.00 $          2,34,720.00 $              76,800.00 Rank 2 3 1 4 Life of the project   7 years 14 years 7 years 4 years Internal Rate of Return 19% 10% 24% 16% Rank 2 4 1 3 Profitabilty index = Present Value of Cash Flows / Investment required 1.39 1.15 1.60 1.18 Rank 2 4 1 3

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.