The Weston Corporation is analyzing projects A, B, and C as possible investment opportunities.Each of these projects has a useful life of five years.The following information has been obtained: Which project has the highest ranking according to the net present value and the project profitability index criteria?

Question

The Weston Corporation is analyzing projects A, B, and C as possible investment opportunities.Each of these projects has a useful life of five years.The following information has been obtained:  Which project has the highest ranking according to the net present value and the project profitability index criteria?

Quizplus · Accepted Answer

According to the net present value criteria, project B has the highest ranking with an NPV of $25,119. Project A has an NPV of $18,773, and project C has an NPV of $11,643. 
According to the project profitability index criteria, project B also has the highest ranking with a PPI of 1.47. Project A has a PPI of 1.37, and project C has a PPI of 1.23. These results show that project B is the best choice out of the three investment opportunities.

The Weston Corporation Is Analyzing Projects A, B, and C