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Preference Ranking of Projects

Dimple Company has limited funds available for investments and must ration the funds among four competing projects. Selected information on the four projects follows:

Project Investment Net Present Life of the Internal Rate
Required Value Project (yrs) of Return

A $800,000 $221,615 7 18%
B $675,000 $210,000 12 16%
C $500,000 $175,000 7 20%
D $700,000 $152,544 3 22%

The net present values above have been computed using a 10% discount rate. The company needs assistance in determining which project to accept first, second, and so forth. The company investment funds are limited

Compute the project profitability index for each project
In order of preference, rank the four projects in terms of:
1. Net present value
2. Project profitability index
3. Internal rate of return

Which ranking would you recommend and why?
please reply in word "doc"

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Solution Summary

The solution explains the ranking for projects in terms of Net present value, Project profitability index and Internal rate of return and which ranking should be used for decision making