information on four investment projects being investigated by Clenning Company i

Question

information on four investment projects being investigated by Clenning Company is as follows Project Number S(610,000)$(560,000) (410,000) 609,180 s 49,180 $(520,000) 647,220 $ 127,220 Investment required Present value of cash inflows at a 8% discount rate 812,110 499,760 Net present value S 202,110 S 89,760 9 years 15% 6 years 16% 18 years Life of the project Intenal rate of return 9 years 13% 990 Since 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 Required. 1. Compute the project profitability index for each investment project (Round your answers to 2 decimal places.) Project Profitability Index Project 1 Project 2 Project 3 Project 4

Explanation / Answer

1 Project profitability Index Project 1 1.33 =812110/610000 Project 2 1.09 =609180/560000 Project 3 1.22 =499760/410000 Project 4 1.24 =647220/520000 2 Net present value Project profitability Index Internal rate of return Project 1 1 1 2 Project 2 4 4 4 Project 3 3 3 3 Project 4 2 2 1

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