Reference: 10-04
the Finney Company Is Reviewing the Possibility of Remodelling

Reference: 10-04
The Finney Company is reviewing the possibility of remodelling one of its showrooms and buying some new equipment to improve sales operations. The remodelling would cost $120,000 now and the useful life of the project is 10 years. Additional working capital needed immediately for this project would be $30,000; the working capital would be released for use elsewhere at the end of the 10-year period. The equipment and other materials used in the project would have a salvage value of $10,000 in 10 years. Finney's discount rate is 16%.
-Information on four investment proposals is given below: $$\begin{array} { | c | l | l | } \hline \text { Proposal } & \text { Investment } & \text { Net Present Value } \\\hline 1 & \$ 50,000 & \$ 30,000 \\\hline 2 & \$ 60,000 & \$ 24,000 \\\hline 3 & \$ 30,000 & \$ 15,000 \\\hline 4 & \$ 45,000 & \$ 9,000 \\\hline\end{array}$$ In what order do the proposals in terms of preference according to the profitability index?

A) 1, 2, 3, 4.
B) 1, 3, 2, 4.
C) 2, 1, 4, 3.
D) 3, 4, 1, 2.