Oxford Company has limited funds available for investment and must ration the funds among the four competing projects shownbelow:Project RequiredAInflows$ 120,000$ 239,323$ 133,000$ 212,000$ 102,000$ 170,035$ 172,000$ 248,136The net present values above have been computed using a 10% discount rate.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.BPresentInvestment Value of CashCDRequired 1 Required 2Life oftheProject(years)7127Complete this question by entering your answers in the tabs below.ProjectACompute the profitability Index for each project.Note: Round your answers to 2 decimal places.3ProfitabilityIndexInternalRateof Return20%22%19%21%Prev5 of 5wwwNext

Profitability Index refers to the technique used to measure the ratio between the present value of…

Answered: Oxford Company has limited funds…

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

Section: Chapter Questions

Problem 1PS

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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 InvestmentRequired NetPresentValue Life of theProject(years) A $ 480,000 $ 132,969 7 B 405,000 126,000 12 C 300,000 105,105 7 D 525,000 114,408 3 E 450,000 (26,088 ) 6 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. Required: 1. Compute the profitability index for each project. (Round your answers to 2 decimal places.) 2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index.
Duo Corporation is evaluating a project with the following cash flows: Year 0 1 2 3 4 5 Cash Flow -$ 15,300 6,400 7,600 7,200 6,000 -3, 400 The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the project using all three methods. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Discounting approach Reinvestment approach Combination approach % % %
Crenshaw Enterprises has gathered projected cash flows for two projects. Year Project Project J 0 1234 -$260,000-$260,000 114,000 105,000 89,000 78,000 91,000 100,000 a. Interest rate b. 102,000 109,000 a. At what interest rate would the company be indifferent between the two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Which project is better if the required return is above this interest rate? do %
Compute the IRR statistic for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 4 5 Cash flow −$3,600 $1,110 $1,050 $900 $680 $480 Should the project be accepted or rejected?multiple choice rejected accepted
None
Compute the NPV statistic for Project U if the appropriate cost of capital is 11 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and roundyour final answer to 2 decimal places.) Project U Time: 0 1 2 3 4 5 Cash flow: -$2, 500 $750 $2, 480 -$720 $700 -$300
Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this project. Cost and cash flows are shown in the table. What is the NPV of the project? Year0 ($11,368,000)1 $2,112,5892 $3,787,5523 $3,300,6504 $4,115,8995. $ 4,556,424 Round to two decimal places. For year 0 , its initial investment .
Compute the IRR statistic for Project E. The appropriate cost of capital is 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 4 5 Cash flow -$1,900 $710 $750 $700 $480 $280 IRR % 90 Should the project be accepted or rejected? O accepted O rejected
Compute the MIRR statistic for Project I if the appropriate cost of capital is 13 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project I Time: Cash flow: MIRR -$11,200 rejected O accepted 1 $5,430 % 2 $4,280 Should the project be accepted or rejected? 3 $1,620 $2,100
Compute the IRR statistic for Project F. The appropriate cost of capital is 12 percent. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Project F Time: 01234 Cash flow: -$11,000 $ 3,350 $ 4,180 $ 1,520 $2,000 Should the project be accepted or rejected?
Compute the NPV statistic for Project Y if the appropriate cost of capital is 11 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project Y Time: 0 1 2 3 4 Cash flow: −$8,200 $3,670 $4,500 $1,840 $620
Year 0 ($100,000)-Project Outlay (The bracket indicates a negative figure) Year 1 Year 2 Year 3 Year 4 Year 5 $ 18,000 $ 18,000 $18,000 $18,000 $ 18,000 Assume that cash flows are reinvested at the rate of 10%, compounded annually. Calculate the Modified Internal Rate of Return (MIRR) on this project. (Note that n=5) a 18.96% b 18% c 15.98% d 19.2%

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