Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5] Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Project Investment Required Present Value of Cash Inflows Life of the Project (years) Internal Rate of Return A $ 200,000 $ 234,323 7 22% B $ 118,000 $ 207,000 12 19% C $ 103,000 $ 165,035 7 20% D $ 162,000 $ 243,136 3 17% The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. Required: 1. Compute the profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of retur
Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5] Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Project Investment Required Present Value of Cash Inflows Life of the Project (years) Internal Rate of Return A $ 200,000 $ 234,323 7 22% B $ 118,000 $ 207,000 12 19% C $ 103,000 $ 165,035 7 20% D $ 162,000 $ 243,136 3 17% The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. Required: 1. Compute the profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of retur
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5]
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:
| Project | Investment Required |
Present Value of |
Life of the Project (years) |
Rate of Return |
|---|---|---|---|---|
| A | $ 200,000 | $ 234,323 | 7 | 22% |
| B | $ 118,000 | $ 207,000 | 12 | 19% |
| C | $ 103,000 | $ 165,035 | 7 | 20% |
| D | $ 162,000 | $ 243,136 | 3 | 17% |
The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth.
Required:
1. Compute the profitability index for each project.
2. In order of preference, rank the four projects in terms of
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