Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Life of the Project Investment Required Present value of Project Internal Rate of Cash Inflows (years) Return A $ 200,000 $ 324,323 7 11% B $ 121,000 $ 297,000 12 16% C $ 103,000 $ 255,035 7 15% D $ 169,000 $ 333,136 3 14% 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: Life of the Project Investment Required Present value of Project Internal Rate of Cash Inflows (years) Return A $ 200,000 $ 324,323 7 11% B $ 121,000 $ 297,000 12 16% C $ 103,000 $ 255,035 7 15% D $ 169,000 $ 333,136 3 14% 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.

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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