BREWER ND LL INTRO MGRL ACTG CON+ AC
19th Edition
ISBN: 9781260711851
Author: BREWER
Publisher: McGraw-Hill Publishing Co.
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Textbook Question
Chapter 12, Problem 11E
Preference Ranking of Investment Projects
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:
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:
a.
b. Project profitability index.
c.
3. Which ranking do you prefer? Why?
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Preference Ranking of Investment Projects
The management of Revco Products is exploring four different investment opportunities. Information on the four projects under study follows:
Because the company’s required rate of return is 10%, a 10% discount rate has been used in the present value computations above. Limited funds are available for investment, so the company can’t accept all of the available projects.
Required:
1. Compute the project profitability index for each investment project.
2. Rank the four projects according to preference, in terms of:
a. Net present value
b. Project profitability index
c. Internal rate of return
3. Which ranking do you prefer? Why?
Oxford Company has limited funds available for investment and must ration the funds among the four competing projects shown
below:
Project Required
A
Inflows
$ 120,000
$ 239,323
$ 133,000
$ 212,000
$ 102,000
$ 170,035
$ 172,000
$ 248,136
The net present values above have been computed using a 10% discount rate.
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.
B
Present
Investment Value of Cash
C
D
Required 1 Required 2
Life of
the
Project
(years)
7
12
7
Complete this question by entering your answers in the tabs below.
Project
A
Compute the profitability Index for each project.
Note: Round your answers to 2 decimal places.
3
Profitability
Index
Internal
Rate
of Return
20%
22%
19%
21%
Prev
5 of 5
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Information on four investment proposals is given below:
Investment required.
Present value of cash inflows
Net present value
Life of the project
Answer is complete but not entirely correct.
Profitability
Index
Investment
Proposal
ABCO
A
В
Required:
1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.)
2. Rank the proposals in terms of preference.
с
D
3
0.41
0.38
0.50
0.33
Rank
Preference
A
$ (240,000)
337,300
$ 97,300
Second
Third
First
Fourth
✓
✔
5 years
Investment Proposal
$ (73,500)
110,250
$36,750
B
$ (105,000)
144,900
$ 39,900
7 years
6 years
$ (126,000).
168,000
$ 42,000
6 years
Chapter 12 Solutions
BREWER ND LL INTRO MGRL ACTG CON+ AC
Ch. 12.A - Basic Present Value Concepts Annual cash inflows...Ch. 12.A - Basic Present value Concepts Julie has just...Ch. 12.A - Prob. 3ECh. 12.A - Prob. 4ECh. 12.A - Basic Present Value Concepts The Atlantic Medical...Ch. 12.A - Prob. 6ECh. 12 - What is the difference between capital budgeting...Ch. 12 - Prob. 2QCh. 12 - Prob. 3QCh. 12 - Prob. 4Q
Ch. 12 - Why are discounted cash flow methods of making...Ch. 12 - Prob. 6QCh. 12 - Identify two simplifying assumptions associated...Ch. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - Prob. 10QCh. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - How is the project profitability index computed,...Ch. 12 - Prob. 14QCh. 12 - Prob. 15QCh. 12 - Prob. 1AECh. 12 - The Excel worksheet form that appears below is to...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 3F15Ch. 12 - Prob. 4F15Ch. 12 - Prob. 5F15Ch. 12 - Prob. 6F15Ch. 12 - Prob. 7F15Ch. 12 - Prob. 8F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 11F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 13F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Payback Method The management of Unter...Ch. 12 - Net Present Value Analysis The management of...Ch. 12 - Internal Rate of Return Wendell’s Donut Shoppe is...Ch. 12 - Uncertain Future Cash Flows Lukow Products is...Ch. 12 - Prob. 5ECh. 12 - Simple Rate of Return Method The management of...Ch. 12 - Prob. 7ECh. 12 - Payback Period and Simple Rate of Return Nicks...Ch. 12 - Prob. 9ECh. 12 - Prob. 10ECh. 12 - Preference Ranking of Investment Projects Oxford...Ch. 12 - Prob. 12ECh. 12 - Payback Period and Simple Rate of Return...Ch. 12 - Comparison of Projects Using Net Present Value...Ch. 12 - Internal Rate of Return and Net Present Value...Ch. 12 - Net Present Value Analysis Windhoek Mines, Ltd.,...Ch. 12 - Net Present Value Analysis; Internal Rate of...Ch. 12 - Net Present Value Analysis Oakmont Company has an...Ch. 12 - Simple Rate of Return; Payback Period Paul Swanson...Ch. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Comprehensive Problem - Lou Barlow, a divisional...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Net Present Value Analysis In five years, Kent...Ch. 12 - Prob. 28PCh. 12 - Prob. 29P
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