Question 1 Question 2 Question 3 (Ignore income taxes in this problem.) The mana

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Question 3

(Ignore income taxes in this problem.) The management of Pattee Corporation is considering three investment projects-M, N, and O. Project M would require an investment of $25,000, Project N of $67,000, and Project O of $70,000. The present value of the cash inflows would be $28,750 for Project M, $73,700 for Project N, and $79,100 for Project O.

Rank the projects according to the profitability index, from most profitable to least profitable.

O, M, N

O, N, M

M, O, N

N, M, O

$400,000 $900,000 $750,000 $1,200,000

Explanation / Answer

1.)$900,000
2.)$484,455
3.)O, M, N

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