Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected Information on the four projects follows: Investment Project Required A B C D $ 180,000 $ 141,000 $ 104,000 $ 175,000 Present Value of Cash Inflows $ 209,323 $ 182,000 $ 140,035 $218,136 Life of the Project (years) 7 12 7 Internal. Rate of Return. 21% 19% 20% 16% 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 return.
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected Information on the four projects follows: Investment Project Required A B C D $ 180,000 $ 141,000 $ 104,000 $ 175,000 Present Value of Cash Inflows $ 209,323 $ 182,000 $ 140,035 $218,136 Life of the Project (years) 7 12 7 Internal. Rate of Return. 21% 19% 20% 16% 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 return.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected
Information on the four projects follows:
Investment
Project Required.
$ 180,000
A
B
C
D
$ 141,000
$ 104,000
$ 175,000
Present
Value of Cash
Inflows
Project
A
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.
B
C
$ 209,323
$ 182,000
$ 140,035
$218,136
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 return.
Complete this question by entering your answers in the tabs below.
Life of
the
Project
(years)
7
12
7
3
Required 1 Required 2
Compute the profitability index for each project. (Round your answers to 2 decimal places.)
Internal.
Rate
of Return
21%
19%
20%
16%
Profitability
Index
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