Question
Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows: Project
Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows:
Project | Investment Required | Net Present Value | Life of the Project (years) | ||||||
A | $ | 515,000 | $ | 41,800 | 7 | ||||
B | 875,000 | 133,100 | 12 | ||||||
C | 312,000 | 106,700 | 7 | ||||||
D | 502,000 | 123,700 | 3 | ||||||
E | 104,000 | (34,000 | ) | 6 | |||||
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, which to accept second, and so on.
Required:
1. Compute the profitability index for each project. (Round your answers to 2 decimal places.)
a
b
c
d
e
2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index.
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