Oxford Company has limited funds available for investment and must information on the four projects follows: Project Investment Required Present value of Cash Inflows Life of the Project Internal Rate of (years) Return A $ 130,000 $ 219,323 7 21% B $ 107,000 $ 192,000 12 17% C $ 100,000 $ 150,035 7 16% D $ 174,000 $ 228,136 3 22% es 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Oxford Company has limited funds available for investment and must
information on the four projects follows:
Project
Investment
Required
Present value
of Cash
Inflows
Life of
the
Project
Internal
Rate of
(years)
Return
A
$ 130,000
$ 219,323
7
21%
B
$ 107,000
$ 192,000
12
17%
C
$ 100,000
$ 150,035
7
16%
D
$ 174,000
$ 228,136
3
22%
es
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.
Transcribed Image Text:Oxford Company has limited funds available for investment and must information on the four projects follows: Project Investment Required Present value of Cash Inflows Life of the Project Internal Rate of (years) Return A $ 130,000 $ 219,323 7 21% B $ 107,000 $ 192,000 12 17% C $ 100,000 $ 150,035 7 16% D $ 174,000 $ 228,136 3 22% es 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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