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QUESTION:

Bramley Manufacturing is considering three capital investment proposals. At this time, the company has funds available to pursue only one of the three investments.

View the capital investment proposals.

Requirement

Which investment should Bramley Manufacturing pursue at this time? Why?

Since each investment presents a positive NPV, Bramley Manufacturing should use the compare the profitability of each investment.

ANSWER:

ince each investment presents a positive​ NPV,
Bramley
Manufacturing should use the
profitability index
to compare the profitability of each investment.
Part 2
Use the method selected above to compare the profitability of each investment beginning with Equipment A. ​(Enter all amounts as positive numbers. Round your final answer to two decimal​ places.)
 
Equipment A
Equipment B
Equipment C
Present value of net cash inflows
$1,695,000
$1,960,000
$2,190,000
Divide by:
Initial investment
$1,500,000
$1,750,000
$1,825,000
Profitability index
1.13
1.12
1.20
Part 3
Which investment should
Bramley
Manufacturing pursue at this​ time? Why?

Bramley
should invest in Equipment
C
​,
as it is the most profitable project.

Posted by Cleveland on September 5, 2024
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