Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5]

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	Present Value of Cash Inflows	Life of the Project (years)	Internal Rate of Return
A	$ 180,000	$ 224,323	7	21%
B	$ 151,000	$ 197,000	12	18%
C	$ 102,000	$ 155,035	7	17%
D	$ 161,000	$ 233,136	3	16%

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.