Oxford Company has limited funds available for investment and must ration the fu

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: 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. Compute the project profitability index for each project. (Round your answers to 2 decimal places.) In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.

Explanation / Answer

Profitability Index = (PV of future cash flows) ÷ Initial investment: where PV= the present value of the future cash flows

PROJECT PROFITABLITY INDEX

A 44232 /160000 = .27

B 42000 / 135000 = .31

C 35035 / 100000 = .35

D 38136 / 175000 = .22

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.