(Ignore Income Taxes in This Problem

question 134

Essay

(Ignore income taxes in this problem.) The management of Suddreth Corporation is considering the following three investment projects: The only cash outflows are the initial investments in the projects.
Required:
Rank the investment projects using the project profitability index. Show your work

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Definitions:

Absorption Costing

An accounting method that includes both variable and fixed production costs in the cost of goods sold.

Total Gross Margin

A financial metric that measures the difference between revenue and the cost of goods sold, indicating the profitability of sales before deducting operating expenses.

Variable Costing

A method of inventory costing that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of a product.

Net Operating Income

Income from a company's operations, calculated by subtracting operating expenses from operating revenue, excluding income and expenses from non-operating activities.