Please help me. Thankyou. Oxford Company has limited funds available for investment and must ration the funds among four competing projects. SelectedInformation on the four projects follows:InvestmentProject Required.$ 180,000ABCD$ 141,000$ 104,000$ 175,000PresentValue of CashInflowsProjectAThe net present values should be computed using a 10% discount rate. The company wants your assistance in determining whichproject to accept first, second, and so forth.BC$ 209,323$ 182,000$ 140,035$218,136Required: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.Life oftheProject(years)71273Required 1 Required 2Compute the profitability index for each project. (Round your answers to 2 decimal places.)Internal.Rateof Return21%19%20%16%ProfitabilityIndex< Prev4 of 6Next >

Net Present Value (NPV): NPV is a financial metric used to assess the profitability of an investment…

Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected Information on the four projects follows: Investment Project Required A B C D $ 180,000 $ 141,000 $ 104,000 $ 175,000 Present Value of Cash Inflows $ 209,323 $ 182,000 $ 140,035 $218,136 Life of the Project (years) 7 12 7 Internal. Rate of Return. 21% 19% 20% 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: Investment Project Required A B C D $ 180,000 $ 141,000 $ 104,000 $ 175,000 Present Value of Cash Inflows $ 209,323 $ 182,000 $ 140,035 $218,136 Life of the Project (years) 7 12 7 Internal. Rate of Return. 21% 19% 20% 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.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...

See similar textbooks

Similar questions

Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28.000 and is expected to generate the following cash flows: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.
Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows: Required: Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
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 InvestmentRequired PresentValue of Cash Inflows Life oftheProject(years) InternalRateof Return A $ 160,000 $ 259,323 7 16 % B $ 135,000 $ 232,000 12 18 % C $ 100,000 $ 190,035 7 22 % D $ 164,000 $ 268,136 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.
Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows: Project InvestmentRequired NetPresentValue Life of theProject(years) A $ 480,000 $ 132,969 7 B 405,000 126,000 12 C 300,000 105,105 7 D 525,000 114,408 3 E 450,000 (26,088 ) 6 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, which to accept second, and so on. Required: 1. Compute the profitability index for each project. (Round your answers to 2 decimal places.) 2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index.
Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying to decide betweentwo alternative uses for the funds as follows:Invest in Invest inProject X Project YInvestment required ...................................... $35,000 $35,000Annual cash inflows ...................................... $9,000Single cash inflow at the end of 10 years ..... $150,000Life of the project .......................................... 10 years 10 yearsThe company’s discount rate is 18%.Required:(Ignore income taxes.) Which alternative would you recommend that the company accept? Show all computations using the net present value approach. Prepare separate computations for each project.
Newland Company is considering investing in one of two projects – A or B. The initial cost and net cash inflows from each project are shown below. The discount rate for both projects is 18% per cent. Cash Flow Project A Project B $ $ Initial Cost 3,000,000 3,500,000 Net Cash Inflows Year 1 800,000 1,000,000 Year 2 800,000 1,000,000 Year 3 1,200,000 700,000 Year 4 1,200,000 800,000 Year 5 1,200,000 800,000 Year Factor 1 0.8475 2 0.7182 3 0.6086 4 0.5158 5 0.4371 Discount factors for the projects @18% per annum are as follows: Required: Calculate the payback period for each project and identify the project in which the company should invest, giving ONE reason for your choice. Calculate the Accounting Rate of Return on initial capital for each project