The Deta Company Is Analyzing Projects X, Y, and Z

question 55

Multiple Choice

The Deta Company is analyzing projects X, Y, and Z as possible investment opportunities. Each of these projects has a useful life of six years. The following information has been obtained: $\begin{array}{lrr}&\text { Project X} &\text { Project Y} &\text { Project Z} \\\\ \text { Initial investment needed. } &£ 260,000 & £ 180,000 & £ 340,000\\ \text { Present value of future cash inflows.} &£ 295,000 & £ 220,000 & £ 390,000 \\ \text { Internal rate of return.} &20 \% & 16 \% & 18 \%\\\end{array}$

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Which of the following statements is correct

• A)Project X is preferred over Project Y according to the profitability index.
• B)Project Y is preferred over Project Z according to an internal rate of return ranking.
• C)Project Z is preferred over Project X according to a net present value ranking.
• D)Project X is preferred over Project Z according to the profitability index.

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Definitions:

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