A company is considering four mutually exclusive projects A, B, C, and D.Project A requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $62,500 per year for two years.Project B requires an initial investment of $160,000 and is expected to generate after-tax cash flows of $72,000 per year for three years.Project C requires an initial investment of $125,000 and is expected to generate $45,000 per year for four years.Project D requires an initial investment of $200,000 and is expected to generate after-tax cash flows of $87,500 per year for three years.The appropriate discount rate is 10%.Rank the projects by their Profitability Index (PI)in descending order (i.e.from highest PI to lowest).

Question

Quizplus · Accepted Answer

The Answer of A company is considering four mutually exclusive projects A, B, C, and D.Project A requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $62,500 per year for two years.Project B requires an initial investment of $160,000 and is expected to generate after-tax cash flows of $72,000 per year for three years.Project C requires an initial investment of $125,000 and is expected to generate $45,000 per year for four years.Project D requires an initial investment of $200,000 and is expected to generate after-tax cash flows of $87,500 per year for three years.The appropriate discount rate is 10%.Rank the projects by their Profitability Index (PI)in descending order (i.e.from highest PI to lowest).

A Company Is Considering Four Mutually Exclusive Projects A, B