Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows: Project A B с D Net Present Investment Required Value $ 709,000 $ 78,000 497,000 122,000 105,700 174,000 (60,300) 656,000 623,000 482,000 Project A B C D E Life of the Project (years) 7 The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, which to accept second, and so on. Profitability Index 12 7 Required: 1. Compute the profitability index for each project. (Round your answers to 2 decimal places.) 3 6 First preference Second preference Third preference Fourth preference Fifth preference 2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index. Net Present Value Profitability Index

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected
information on the five projects follows:
Project
A
B
C
D
E
Investment
Required
$ 709,000 $ 78,000
497,000
122,000
656,000
105,700
623,000
482,000
Project
A
B
с
D
E
Net
Present
Value
The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining
which project to accept first, which to accept second, and so on.
Profitability
Index
174,000
(60,300)
Required:
1. Compute the profitability index for each project. (Round your answers to 2 decimal places.)
Life of the
Project
(years)
7
12
7
3
6
First preference
Second preference
Third preference
Fourth preference
Fifth preference
2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index.
Net Present Value Profitability Index
3. This part of the question is not part of your Connect assignment.
Transcribed Image Text:Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows: Project A B C D E Investment Required $ 709,000 $ 78,000 497,000 122,000 656,000 105,700 623,000 482,000 Project A B с D E Net Present Value The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, which to accept second, and so on. Profitability Index 174,000 (60,300) Required: 1. Compute the profitability index for each project. (Round your answers to 2 decimal places.) Life of the Project (years) 7 12 7 3 6 First preference Second preference Third preference Fourth preference Fifth preference 2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index. Net Present Value Profitability Index 3. This part of the question is not part of your Connect assignment.
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