MANAGERIAL 6154 The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows
The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:Project 1Project 2Project 3Project 4Investment required$(270,000)$(450,000)$(360,000)$(480,000)Present value of cash at inflows at 10% discount rate336,140522,970433,400567,270Net present value$66,140$72,970$73,400$82,270Life of the project6 years3 years12 years6 yearsInternal rate of return18%19%14%15%Because of the company’s required rate of return is 10%, 1 10% discount rate has been used in the present, value computations above. Limited funds are available for investment, so the company cant accept all of the available projects.Required:compute the project profitability index for each investment project.Rank the four projects according to preference, in terms of:Net present valueProject profitability indexInternal rate of returnWhich ranking do you prefer? Why?
