Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selectedinformation on the four projects follows:InvestmentProject RequiredA$ 140,000B$ 122,000CD$ 100,000$ 174,000PresentValue ofCash Inflows$ 304,323$ 277,000$235,035$313,136Required 1 Required 2Life oftheProject(years)71273The 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.ProjectABCInternal.RateRequired: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.of Return14%Complete this question by entering your answers in the tabs below.19%18%178ProfitabilityIndexCompute the profitability index for each project. (Round your answers to 2 decimal places.)

Capital budgeting is the process of making investment decisions in capital expenditure. A capital…

Answered: Required: 1. Compute the profitability…

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

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
$ 140,000
B
$ 122,000
C
D
$ 100,000
$ 174,000
Present
Value of
Cash Inflows
$ 304,323
$ 277,000
$235,035
$313,136
Required 1 Required 2
Life of
the
Project
(years)
7
12
7
3
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.
Project
A
B
C
Internal.
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.
of Return
14%
Complete this question by entering your answers in the tabs below.
19%
18%
178
Profitability
Index
Compute the profitability index for each project. (Round your answers to 2 decimal places.)

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