Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selectedinformation on the four projects follows:Life ofNettheInternalProject(years) of ReturnInvestmentPresentRateProjectRequired$970,000$730,000$670,000$830,000Value$176,514$175,933$185,782$129,082A6.16%В1115%C19%17%The net present values above have been computed using a 10% discount rate. The company wants your assistance in determiningwhich project to accept first, second, and so forth. Compute the project profitability index for each project. (Round your answers to 2 decimal places.)ProjectProject ProfitabilityIndexAВCDIn order of preference, rank the four projects in terms of net present value, project profitability index and internal rate ofreturn.Net PresentValueProjectProfitabilityIndexInternal Rateof ReturnFirst preferenceSecond preferenceThird preferenceFourth preference

profitability index higher the better. NPV higher the better. IRR higher the better.

Answered: Oxford Company has limited funds…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 19PROB

See similar textbooks

Similar questions

Capital rationing decision involving four proposals Kopecky Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: The company’s capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on allprojects. 1f the preceding standards are met, the net present value method and presentvalue indexes are used to rank the remaining proposals. Instructions Compute the present value index for each oldie proposals in part (4). Round to two decimal places.
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 NetPresentValue Life oftheProject(years) InternalRateof Return A $ 870,000 $ 576,770 9 25 % B $ 755,000 $ 308,594 14 17 % C $ 720,000 $ 442,949 9 24 % D $ 920,000 $ 145,122 5 16 % 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. 2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return. Compute the project profitability index for each project. (Round your answers to 2 decimal places.) Project Project Profitability Index A B C D
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 NetPresentValue Life oftheProject(years) InternalRateof Return A $ 870,000 $ 576,770 9 25 % B $ 755,000 $ 308,594 14 17 % C $ 720,000 $ 442,949 9 24 % D $ 920,000 $ 145,122 5 16 % 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 Project Project Profitability Index A B C D
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.
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.
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 $240,000 $920,000 Proposal B: $320,000 1 $26,000 $90,000 2 26,000 90,000 3 6,000 70,000 4 6,000 70,000 5 (44,000) 20,000 $20,000 $340,000 Proposal C: $108,000 1 $33,400 $55,000 2 31,400 53,000 3 28,400 50,000 4 25,400 47,000 5 23,400 45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2 100,000 180,000 3 80,000 160,000 4 20,000 100,000 5 0 80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: $680,000 1 $64,000 $200,000 2    64,000   200,000 3    64,000   200,000 4    24,000   160,000 5    24,000    160,000 $240,000 $920,000 Proposal B: $320,000 1    $26,000 $90,000 2      26,000     90,000 3        6,000     70,000 4        6,000     70,000 5      (44,000)     20,000     $20,000 $340,000 Proposal C: $108,000 1     $33,400 $55,000 2      31,400    53,000 3      28,400    50,000 4      25,400    47,000 5     23,400    45,000 $142,000 $250,000 Proposal D: $400,000 1 $100,000 $180,000 2   100,000   180,000 3     80,000   160,000 4    20,000   100,000 5 0       80,000 $300,000 $700,000 The company's…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2    64,000    200,000 3    64,000    200,000 4    24,000    160,000 5    24,000    160,000 $240,000 $ 920,000 Proposal B: $320,000 1 $ 26,000 $ 90,000 2    26,000     90,000 3      6,000     70,000 4      6,000     70,000 5 (44,000)     20,000 $ 20,000 $340,000 Proposal C: $108,000 1 $ 33,400 $ 55,000 2    31,400    53,000 3    28,400    50,000 4    25,400    47,000 5    23,400    45,000 $142,000 $ 250,000 Proposal D: $400,000 1 $100,000 $ 180,000 2   100,000    180,000 3    80,000    160,000 4    20,000    100,000 5 0        80,000 $300,000 $700,000 The company's capital rationing policy…
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $680,000 1 $ 64,000 $ 200,000 2    64,000    200,000 3    64,000    200,000 4    24,000    160,000 5    24,000    160,000 $240,000 $ 920,000 Proposal B: $320,000 1 $ 26,000 $ 90,000 2    26,000     90,000 3      6,000     70,000 4      6,000     70,000 5 (44,000)     20,000 $ 20,000 $340,000 Proposal C: $108,000 1 $ 33,400 $ 55,000 2    31,400    53,000 3    28,400    50,000 4    25,400    47,000 5    23,400    45,000 $142,000 $ 250,000 Proposal D: $400,000 1 $100,000 $ 180,000 2   100,000    180,000 3    80,000    160,000 4    20,000    100,000 5 0        80,000 $300,000 $700,000 The company's capital rationing policy…
Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated Operating income, and net cash flow for each proposal are as follows: Investment Year Operating Income Net Cash Flow Proposal A: $450,000 1 $30,000 $120,000 2    30,000   120,000 3    20,000   110,000 4    10,000   100,000 5   (30,000)    60,000 $60,000 $510,000 Proposal B: $200,000 1 $60,000 $100,000 2    40,000     80,000 3    20,000     60,000 4   (10,000)     30,000 5 (20,000)     20,000 $90,000 $290,000 Proposal C: $320,000 1 $36,000 $100,000 2    26,000    90,000 3    26,000    90,000 4    16,000    80,000 5    16,000    80,000 $120,000 $440,000 Proposal D: $540,000 1 $92,000 $200,000 2   72,000   180,000 3    52,000   160,000 4    12,000   120,000 5     (8,000)   100,000 $220,000 $760,000 The company's capital rationing policy requires a…

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

SEE MORE TEXTBOOKS