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el Sheffield Manufacturing is considering three capital investment proposals. At

ID: 2584904 • Letter: E

Question

el Sheffield Manufacturing is considering three capital investment proposals. At this time, Sheffield only has funds available to pursue one of the three investments (Click the icon to review the proposals.) Which investment should Sheffield pursue at this time? Why? Since each investment requires a different initial investment and presents a positive NPV, Shetfield Manufacturing should use egs the of $ ashRound the evaluation measure to two decimal places, X.XX,) to compare the profitability of each investment. Wer Select the labels for the evaluation measure you determined above. Enter the amounts into the formula, beginning with Equipment A, and calculate the amount you will use to evaluate each investment.(Enter all amounts as positive numbers r for Equipment A Equipment B e th oposed dwar te Data Table Equipment A Equipment B Equipment C 1.736,845 S 2.547,135 S 2.242.989 Present value of net cash inflows Initial Investment NPV $ (1,389,476) (2158,589) (1,884,865) cled e of 347 369$ 388.546 S 358,124 MacBook Pro F7 dele 9 0

Explanation / Answer

Which investment should Sheffeld Pursue at this time? Since each investment requires a Different initial Investment and present Positive NPV , Sheffeld Manufacturing should use the "Profitability Index method " to compare the profitability of each investment Profitability Index Method formula : Profitability Index = Present value of cash Inflows /Investment Required Present Value of cash Inflows / Initial Investment PI Equipment A 1736845 / 1389476 1.25 Equipment B 2547135 / 2158589 1.18 Equipment C 2242989 / 1884865 1.19 Sheffeld should pursue investment in Equipment "A", because its profitability index is Higher then remaining Investments and having positive NPV.