Oxford Company has limited funds available for investment and must ration the funds among four...
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Accounting
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
Investment Required
Present Value of Cash Inflows
Life of the Project (years)
Internal Rate of Return
A
$
150,000
$
274,323
7
15
%
B
$
129,000
$
247,000
12
20
%
C
$
103,000
$
205,035
7
19
%
D
$
160,000
$
283,136
3
18
%
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.
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