Shaylee Corp has $2.00 million to invest in new projects. The company\'s manager

Question

Shaylee Corp has $2.00 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 Project A Project B Project C Project D S 560,000 240,000 800,000 955,000 775,000 420,000 1,210,000 1,570,000 Required: 1. Is Shaylee able to invest in all of these projects simultaneously? O Yes 0 No 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

1)Total Investment if all projects are undertaken : 560000+240000+800000+955000=2555000

Amount available : 2,000,000

so shalyee is not able to invest in all project

option :No

2)Profitability index =Present value /initial investment

2b)

Ranking is done on basis of highest Profitability index to lowest.

Project profitability index A 77500/560000 1.3839 B 420000/240000 1.7500 C 1210000/800000 1.5125 D 1570000/955000 1.6440

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