Perkins Company Is Considering Several Investment Proposals, as Shown Below

question 68

Multiple Choice

Perkins Company is considering several investment proposals, as shown below: Rank the proposals in terms of preference using the project profitability index:

• A)D, B, C, A
• B)B, D, C, A
• C)B, D, A, C
• D)A, C, B, D

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Definitions:

Cost Of Capital

The minimum return rate a company needs to achieve on its investments to preserve its market valuation and draw in financing.

Cash Flow

The total sum of cash and cash-like assets moving in and out of a company.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Cost Of Capital

The essential yield required to justify proceeding with a capital expenditure venture, such as the erection of a new plant.