Question
Exercise 13-11 Preference Ranking of Investment Projects [LO13-5] Oxford Company has limited funds available for investment and must ration the funds among four competing projects.
Exercise 13-11 Preference Ranking of Investment Projects [LO13-5]
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 | $870,000 | $569,750 | 9 | 25% |
B | $755,000 | $313,210 | 14 | 17% |
C | $720,000 | $449,077 | 9 | 24% |
D | $920,000 | $141,480 | 5 | 16% |
|
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.
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started