Vishnu Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selectedinformation on the four projects follows:InvestmentPresentValue ofLife oftheProjectInternalRateProjectRequiredCash Inflows(years)of ReturnA$ 130,000$ 249,323720%B$ 136,000$ 222,000CD.$ 105,000$169,000$ 180,035$ 258,136127318%19%17%The 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.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.

Certainly! Let's delve deeper into the analysis of each metric and discuss the implications of the…

Answered: Oxford Company has limited funds…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

See similar textbooks

Similar questions

Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.
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.
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.
Capital rationing decision for a service company involving four proposals 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: The companys 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 all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1. Compute the cash payback period for each of the four proposals. 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. (Round to one decimal place.) 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the computed amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should be accepted for further analysis and which should be rejected. 4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 15% and the present value table appearing in Exhibit 2 of this chapter. 5. Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). 8. Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).
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…

SEE MORE QUESTIONS

Recommended textbooks for you

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

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

Publisher:

South-Western College Pub

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

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

Publisher:

South-Western College Pub

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

Century 21 Accounting Multicolumn Journal

Accounting

ISBN:

9781337679503

Author:

Gilbertson

Publisher:

Cengage

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS