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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
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 | $ 150,000 | $ 229,323 | 7 | 22% |
B | $ 120,000 | $ 202,000 | 12 | 21% |
C | $ 100,000 | $ 160,035 | 7 | 20% |
D | $ 162,000 | $ 238,136 | 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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