Help Save he management of Revco Products is exploring four different investment

Question

Help Save he management of Revco Products is exploring four different investment opportunities, Information on the four projects under study Investment required Present value of cash inflows at a 10% (270,00) s(ase,0) 6,e) e) 567,270 52,970- 433.400 discount rate Net present value Life of the project 6 years 3 years 12 years 6 years Internal rate of return 15% 6% Because the company's required rate of return is 10%, a 10% dscount rate has been used in the present vane emputation above Limited funds are available for investment, so the company can't accept all of the available projects Required: 1 Compute the project profitablity index for each investment project preference, in terms of net present value, próject profitability index and internal rate of return Complete this question by entering your answers in the tabs below Required Required 2 Prex 5015111 Next 6 8 0

Explanation / Answer

SOLUTION

(A)

(B)

Project 1 Project 2 Project 3 Project 4 Net Present value of the project (A) 66,140 72,970 73,400 87,270 Investment required (B) 270,000 450,000 360,000 480,000 Project profitability index (A/B) 0.24 0.16 0.20 0.18

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