Question
WILL THUMBS UP UPON SOLVING!! Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on
WILL THUMBS UP UPON SOLVING!!
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 | $ 269,323 | 7 | 15% |
B | $ 130,000 | $ 242,000 | 12 | 20% |
C | $ 100,000 | $ 200,035 | 7 | 19% |
D | $ 160,000 | $ 278,136 | 3 | 18% |
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.
PROJECT | PROFITABILITY INDEX |
A | |
B | |
C | |
D |
NET PRESENT VALUE | PROFITABILITY INDEX | INTERNAL RATE OF RETURN | |
FIRST PREFERENCE | |||
SECOND PREFERENCE | |||
THIRD PREFERENCE | |||
FOURTH PREFERENCE |
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