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Exercise 7-11 (Algo) Preference Ranking of Investment Projects [LO7-5] Oxford Company has limited funds available for investment and must ration the funds among four competing

Exercise 7-11 (Algo) Preference Ranking of Investment Projects [LO7-5]

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 $ 209,323 7 21%
B $ 141,000 $ 182,000 12 19%
C $ 104,000 $ 140,035 7 20%
D $ 175,000 $ 218,136 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.

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