Question

Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Life of the Internal Project Rate (years) of Return Project Net Present Value $318,343 $207, 045 $195,081 $225,079 Investment Required $930,000 $710,000 $630,000 $830,000 21% 11 16% 20% 22% 4. 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. Complete this question by entering your answers in the tabs below.
1

Answer 1

Profitability of Index = Net present Value / Investment Required Calculation of Profitability Index Α в Investment Required 930000 710000 Net Present Value 318343 207045 Profitablility index: 0.342304 (Net present value / Investment) 0.291613 с TD 630000 830000 195081 225079 0.309652 0.271180 Answers Investmnet Proposal A B Project PI 0.34 OR 1.34 0.29 OR 1.29 0.31 OR 1.31 0.27 OR 1.27 Internal Net Present Profitability Rate of Value index return Α D First Preference Second Preference Third Preference Fourth Preference B C Criteria for Ranking B D Net Present Value Profitability index Internal Rate of return Highest to Lowest Highest to Lowest Highest to Lowest