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 Cash Inflows Life of the Project (years) Internal Rate of Return A $ 200,000 $ 234,323 7 22% B $ 118,000 $ 207,000 12 19% C $ 103,000 $ 165,035 7 20% D $ 162,000 $ 243,136 3 17% 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 retur

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 Cash Inflows Life of the Project (years) Internal Rate of Return A $ 200,000 $ 234,323 7 22% B $ 118,000 $ 207,000 12 19% C $ 103,000 $ 165,035 7 20% D $ 162,000 $ 243,136 3 17% 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 retur

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ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 20PROB

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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 Cash Inflows	Life of the Project (years)	Internal Rate of Return
A	$ 200,000	$ 234,323	7	22%
B	$ 118,000	$ 207,000	12	19%
C	$ 103,000	$ 165,035	7	20%
D	$ 162,000	$ 243,136	3	17%

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.

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

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