The following projects are all characterized by a single initial cash outflow (the initial investment) followed by a series of cash inflows. Rank them based on profitability index. $\begin{array}{lll}
& \text { Irvestment } & \text { NPV } \
\text { Project A } & \$ 160,000 & \$ 30,000 \
\text { Project B } & \$ 120,000 & \$ 15,000 \
\text { Project C } & \$ 110,000 & \$ 25,000 \
\text { Project D } & \$ 200,000 & \$ 40,000
\end{array}$

Question

The following projects are all characterized by a single initial cash outflow (the initial investment) followed by a series of cash inflows. Rank them based on profitability index. $\begin{array}{lll} 
& \text { Irvestment } & \text { NPV } \
\text { Project A } & \$ 160,000 & \$ 30,000 \
\text { Project B } & \$ 120,000 & \$ 15,000 \
\text { Project C } & \$ 110,000 & \$ 25,000 \
\text { Project D } & \$ 200,000 & \$ 40,000
\end{array}$

Quizplus · Accepted Answer

The profitability index (PI) is calculated as (NPV + Initial Investment) / Initial Investment. Calculating for each project: A: 1.1875, B: 1.125, C: 1.2273, D: 1.2. Ranking them gives C, D, A, B.

The Following Projects Are All Characterized by a Single Initial