Newago, Inc. is strapped for cash for investment projects and must decide which of four projects...

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Accounting

Newago, Inc. is strapped for cash for investment projects andmust decide which of four projects it will fund. Below are theprojects and information about them:

Life Of:

Net The Internal

Investment Present Project Rate Of

Project Required Value In Yrs. Return

1. 80,000 210,000 6 13%

2. 750,000 340,000 10 17%

3. 845,000 333,000 7 12%

4. 695,000 202,000 5 18%

A. Compute the project profitability index for each project.

B. Rank the four projects in order of preference in termsof:

Internal rate Of Return

Project Profitability Index

Net Value

C. Which of the three rankings above do you prefer?

What are the strengths and weaknesses of eachmethod?  

Answer & Explanation Solved by verified expert
3.7 Ratings (294 Votes)
Project Investment required Net present value Life of the project IRR 1 80000 210000 6 13 2 750000 340000 10 17 3 845000 333000 7 12 4 695000 202000 5 18 Project Net present value Investment required Profitability Index of Projects    See Answer
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