Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selectedinformation on the four projects follows:PresentValue ofInvestmentProject RequiredCash InflowsA$ 180,000$ 269,323B$ 130,000$ 242,000C$ 100,000$ 200,035D$ 160,000 $ 278,136Life oftheProject(years)71273InternalRateof Return15%20%19%18%The net present values should be computed using a 10% discount rate. The company wants your assistance in determining whichproject to accept first, second, and so forth.Required:1. Compute the profitability index for each project.A2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return.

ProjectPresent Value ofCash InflowsInvestment RequiredProfitability Index(A)(B)(A) /…

Answered: Oxford Company has limited funds…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Oxford Company has limited funds available for investment and must ration the funds among the four competing projects shown below: Project InvestmentRequired PresentValue of Cash Inflows Life oftheProject(years) InternalRateof Return A $ 170,000 $ 329,323 7 12% B $ 118,000 $ 302,000 12 17% C $ 105,000 $ 260,035 7 16% D $ 165,000 $ 338,136 3 15% The net present values above have been computed using a 10% discount rate. Required: Compute the profitability index for each project. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return
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