(Ignore income taxes in this problem. )Girman Corporation is considering three investment projects: K,L,and M.Project K would require an investment of $27,000,Project L of $59,000,and Project M of $88,000.No other cash outflows would be involved.The present value of the cash inflows would be $31,860 for Project K,$66,080 for Project L,and $95,040 for Project M.Rank the projects according to the profitability index,from most profitable to least profitable.

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Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of the cash inflows by the initial investment. The higher the profitability index, the more profitable the project.For Project K, the profitability index is 31,860 / 27,000 = 1.18.For Project L, the profitability index is 66,080 / 59,000 = 1.12.For Project M, the profitability index is 95,040 / 88,000 = 1.08.Therefore, the projects can be ranked according to profitability index as follows:1. Project K (profitability index = 1.18)2. Project L (profitability index = 1.12)3. Project M (profitability index = 1.08)

(Ignore Income Taxes in This Problem