Shaylee Corp has $2.25 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
|Project A||Project B||Project C||Project D|
|Present value of future cash flows||805,000||435,000||1,240,000||1,600,000|
1. 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?
|Total Investment requird for all Projects:|
|Total Investment required||2675000|
|Total investment required is $ 2.675 mllion and investment in hand is $ 2.25 million, hence the company cannot invest in all projects.|
|Present value of Cash flows||805000||435000||1240000||1600000|
|Divide: Initial Investment||590000||270000||830000||985000|
|(Present value of inflows/ Initial Investment)|
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