A company seeking investment opportunities has collected the following information: $$\begin{array} { | l | r | r | r | r | }
\hline & \text { Project A } & \text { Project B } & \text { Project C } & \text { Project D } \
\hline \text { Initial investment } & \$ 400,000 & \$ 250,000 & \$ 150,000 & \$ 270,000 \
\hline \text { PV of cash inflows } & \$ 570,000 & \$ 295,000 & \$ 210,000 & \$ 282,000 \
\hline \text { Payback period (years) } & 3.6 & 3.0 & 4.75 & 3.5 \
\hline \text { NPV of project } & \$ 170,000 & \$ 45,000 & \$ 60,000 & \$ 12,000 \
\hline \text { Profitability index } & 1.43 & 1.18 & 1.40 & 1.04 \
\hline
\end{array}$$ If the company makes a decision based on the net present value,which project will be selected?

Question

A company seeking investment opportunities has collected the following information: $$\begin{array} { | l | r | r | r | r | } 
\hline & \text { Project A } & \text { Project B } & \text { Project C } & \text { Project D } \
\hline \text { Initial investment } & \$ 400,000 & \$ 250,000 & \$ 150,000 & \$ 270,000 \
\hline \text { PV of cash inflows } & \$ 570,000 & \$ 295,000 & \$ 210,000 & \$ 282,000 \
\hline \text { Payback period (years) } & 3.6 & 3.0 & 4.75 & 3.5 \
\hline \text { NPV of project } & \$ 170,000 & \$ 45,000 & \$ 60,000 & \$ 12,000 \
\hline \text { Profitability index } & 1.43 & 1.18 & 1.40 & 1.04 \
\hline
\end{array}$$ If the company makes a decision based on the net present value,which project will be selected?

Quizplus · Accepted Answer

Project A has the highest NPV of $170,000, making it the most profitable project.

A Company Seeking Investment Opportunities Has Collected the Following Information