Exercise 11-9 Preference Ranking of Investment Projects [LO11-3] Oxford Company
ID: 2528479 • Letter: E
Question
Exercise 11-9 Preference Ranking of Investment Projects [LO11-3]
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.
In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:
Explanation / Answer
Req 1 project Project Project Project A B C D initial investment 990,000 740,000 690,000 890,000 Net present value 229,400 104,350 181,000 143,420 profitability index 0.23 0.14 0.26 0.16 (net present value/investment) Req 2 project Project Project Project A B C D net present value 229,400 104,350 181,000 143,420 Rank I IV II III higher NPV preferred profitability index 0.23 0.14 0.26 0.16 Rank II IV I III IRR 18% 13% 19% 17% Rank II IV I III
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