Biology Forums - Study Force

A company is considering four mutually exclusive projects A, B, C, and D. Project A requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $62,500 per year for two years. Project B requires an initial investment of $160,000 and is expected to generate after-tax cash flows of $72,000 per year for three years. Project C requires an initial investment of $125,000 and is expected to generate $45,000 per year for four years. Project D requires an initial investment of $200,000 and is expected to generate after-tax cash flows of $87,500 per year for three years. The appropriate discount rate is 10%. Rank the projects by their Profitability Index (PI) in descending order (i.e. from highest PI to lowest).

▸ B, C, A, D

▸ C, B, D, A

▸ A, B, C, D

▸ D, A, B, C

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