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 $ 224,323 7 21% B $ 151,000 $ 197,000 12 18% C $ 102,000 $ 155,035 7 17% D $ 161,000 $ 233,136 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.
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 $ 224,323 7 21% B $ 151,000 $ 197,000 12 18% C $ 102,000 $ 155,035 7 17% D $ 161,000 $ 233,136 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.
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 19PROB
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Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5]
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 |
Life of the Project (years) |
Rate of Return |
|---|---|---|---|---|
| A | $ 180,000 | $ 224,323 | 7 | 21% |
| B | $ 151,000 | $ 197,000 | 12 | 18% |
| C | $ 102,000 | $ 155,035 | 7 | 17% |
| D | $ 161,000 | $ 233,136 | 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
![Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5]
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected
information on the four projects follows:
Life of
Present
the
Internal
Investment
Value of
Project
Rate
Project
of Return
Required
$ 180,000
$ 151,000
$ 102,000
$ 161,000
Cash Inflows
(years)
$ 224,323
$ 197,000
$ 155,035
$ 233,136
А
7
21%
B
12
18%
C
7
17%
D
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return.
Net Present
Value
Profitability
Index
Internal Rate
of Return
First preference
Second preference
Third preference
Fourth preference
< Required 1
Required 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F16afad9b-824d-42b7-9e40-175f68ea31da%2F772f1562-689a-4b17-ad7b-bd70b16b190b%2Fp4yuyok_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5]
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected
information on the four projects follows:
Life of
Present
the
Internal
Investment
Value of
Project
Rate
Project
of Return
Required
$ 180,000
$ 151,000
$ 102,000
$ 161,000
Cash Inflows
(years)
$ 224,323
$ 197,000
$ 155,035
$ 233,136
А
7
21%
B
12
18%
C
7
17%
D
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return.
Net Present
Value
Profitability
Index
Internal Rate
of Return
First preference
Second preference
Third preference
Fourth preference
< Required 1
Required 2 >
![Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5]
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected
information on the four projects follows:
Life of
Present
the
Internal
Investment
Value of
Project
Rate
Required
$ 180,000
$ 151,000
$ 102,000
$ 161,000
Project
Cash Inflows
(years)
of Return
$ 224,323
$ 197,000
$ 155,035
$ 233,136
А
7
21%
12
18%
C
7
17%
D
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Compute the profitability index for each project. (Round your answers to 2 decimal places.)
Profitability
Index
Project
А
В
< Required 1
Required 2
>
D](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F16afad9b-824d-42b7-9e40-175f68ea31da%2F772f1562-689a-4b17-ad7b-bd70b16b190b%2Fhox6ojm_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5]
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected
information on the four projects follows:
Life of
Present
the
Internal
Investment
Value of
Project
Rate
Required
$ 180,000
$ 151,000
$ 102,000
$ 161,000
Project
Cash Inflows
(years)
of Return
$ 224,323
$ 197,000
$ 155,035
$ 233,136
А
7
21%
12
18%
C
7
17%
D
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Compute the profitability index for each project. (Round your answers to 2 decimal places.)
Profitability
Index
Project
А
В
< Required 1
Required 2
>
D
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