Question

Shaylee Corp has $2.00 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows:

	Project A		Project B		Project C		Project D
Initial investment	$	428,000	$	243,000	$	733,000	$	958,000
Present value of future cash flows		778,000		428,000		1,213,000		1,573,000

  

Required:

1. Is Shaylee able to invest in all of these projects simultaneously?

2-A. Calculate the profitability index for each project.

2-B. What is Shaylee’s order of preference based on the profitability index?

Is Shaylee able to invest in all of these projects simultaneously?

	Is Shaylee able to invest in all of these projects simultaneously?

2-A. Calculate the profitability index for each project. (Round your answers to 4 decimal places.)

2-B. What is Shaylee’s order of preference based on the profitability index?

	Profitability Index	Rank
Project A
Project B
Project C
Project D

Answer 1

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