Rand Corporation is considering five different investment opportunities. The company's cost of capital is 12 percent. Data on these opportunities under consideration are given below.
|
Project
|
Investment ($)
|
PV at 12% ($)
|
NPV ($)
|
IRR (%)
|
Profitability Index
(Rounded)
|
|
1
|
35,000
|
39,325
|
4,325
|
16
|
1.12
|
|
2
|
20,000
|
22,930
|
2,930
|
15
|
1.15
|
|
3
|
25,000
|
27,453
|
2,453
|
14
|
1.10
|
|
4
|
10,000
|
10,854
|
854
|
18
|
1.09
|
|
5
|
9,000
|
8,749
|
(251)
|
11
|
0.97
|
Based on these data:
(a) Rank these five projects in the descending order of preference, according to NPV, IRR, and profitability index (or benefit/cost ratio).
(b) Which ranking would you prefer?
(c) Based on your answer to part (b), which projects would you select if $55,000 is the limit to be spent?'