Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

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

ID: 2533824 • Letter: O

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.

  

        

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

Computation of Profitability Index Project Required Investment (or) Discounted Cash Outflows Net Present Value Discounted Cash Inflows = Net Present Value + Discounted cash outflows Profitability Index = Discounted Cash inflows/Discounted Cash Outflows A 990000 229400 1219400 1.23 B 740000 104350 844350 1.14 C 690000 181000 871000 1.26 D 890000 143420 1033420 1.16 Answer to Part 2 Project Net Present Value Order A 229400 1 B 104350 4 C 181000 2 D 143420 3 Project Profitability Index Order A 1.23 2 B 1.14 4 C 1.26 1 D 1.16 3 Project Internal Rate of Return Order A 18% 3 B 13% 1 C 19% 4 D 17% 2