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Exercise 11-9 Preference Ranking of Investment Projects [LO11-3] Oxford Company has limited funds available for investment and must ration the funds among four competing projects.
Exercise 11-9 Preference Ranking of Investment Projects [LO11-3]
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: |
Project | Investment Required | Net Present Value | Life of the Project (years) | Internal Rate of Return (percent) |
A | $890,000 | $133,570 | 5 | 16% |
B | $765,000 | $341,100 | 10 | 20% |
C | $740,000 | $169,840 | 5 | 19% |
D | $940,000 | $129,410 | 3 | 18% |
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, second, and so forth. |
Required: | |
1. | Compute the project profitability index for each project. (Round your answers to 2 decimal places.) |
2. | In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return. |
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