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 Internal Net the Rate Project (years) 8 Investment Present of Return Required $860,000 $750,000 $710,000 $910,000 Project Value $420,400 $244,420 $367,670 $231,200 (percent) 22% 16% 23% 21% В 13 8 4 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, second, and so forth. Required: 1. Compute the project profitability index for each project. (Round your answers to 2 decimal places.) Project Profitability Index A B C 2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return. Project Profitability Index Net Present Internal Rate Value of Return First preference Second preference Third preference Fourth preference ABCD

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 Internal Net the Rate Project (years) 8 Investment Present of Return Required $860,000 $750,000 $710,000 $910,000 Project Value $420,400 $244,420 $367,670 $231,200 (percent) 22% 16% 23% 21% В 13 8 4 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, second, and so forth. Required: 1. Compute the project profitability index for each project. (Round your answers to 2 decimal places.) Project Profitability Index A B C 2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return. Project Profitability Index Net Present Internal Rate Value of Return First preference Second preference Third preference Fourth preference ABCD

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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