Shaylee Corp has $2.40 million to invest in new projects. The company\'s manager

Question

Shaylee Corp has $2.40 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows $670,000 $ 350,000 S 910,000 S 1,065,000 885,000 475,000 1,400,000 1,560,000 Required 1. Is Shaylee able to invest in all of these projects simultaneously? O No O Yes 2-a. Calculate the profitability index for each project. (Round your answers to 4 decimal places.) Profitability Index Project A Project B Project C Project D 2-b. What is Shaylee's order of preference based on the profitability index? Rank Project A Project B Project C Project D

Explanation / Answer

Req 1 total investment needed for all projects project A 670,000 Project B 350,000 Project C 910,000 Project D 1,065,000 Totyal Investment Needed 2,995,000 Investment in Hand 2,400,000 No, Shaylee is not able to invest in all the projects Req 2: Initial Investment PV of cash inflows Profitability Index project A 670,000 885000 1.32 Project B 350,000 475000 1.36 Project C 910,000 1400000 1.54 Project D 1,065,000 1560000 1.46 Profitability Index: Present value of cash inflows / Initial investment Req 2-B Profitability Index Preference project A 1.32 IV Project B 1.36 III Project C 1.54 I Project D 1.46 II The project with highest Profitability Index is preferred first.

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