Information on four investment proposals is given below:
Investment Proposal
A B C D
Investment required $ (420,000) $ (200,000) $ (170,000) $ (2,400,000) Present value of cash inflows 589,700 276,400 259,700 3,203,000 Net present value $ 169,700 $ 76,400 $ 89,700 $ 803,000 Life of the project 5 years 7 years 6 years 6 years
Required:
1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.)
2. Rank the proposals in terms of preference.