Homework Answers
Profitability Index = PV of Future Cash Flows / Investment
Proposal with highest profitability index will have rank 1, followed by next highest profitability index
| Proposal | A | B | C | D |
| PV of Future Cash Flows | $ 60,000 | $ 105,000 | $ 66,000 | $ 72,000 |
| Investment | $ 40,000 | $ 75,000 | $ 50,000 | $ 45,000 |
| Profitability Index | 1.5 | 1.4 | 1.32 | 1.6 |
| Rank | 2 | 3 | 4 | 1 |
Answer is c. D,A,B,C
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