Exercise 13-11 Preference Ranking of Investment Projects [LO13-5] Oxford Company

Question

Exercise 13-11 Preference Ranking of Investment Projects [LO13-5]

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

Profitability Index NPV of future cash flow/Initial Investment 1 Project Initial investment NPV of future cash flow Profitability index A                 870,000 569750                        0.65 B                 755,000 313210                        0.41 C                 720,000 449077                        0.62 D                 920,000 141480                        0.15 2 As per terms of NPV, Project profitability index and internal rate of return preferrence is below Project Preferrence A I B III C II D IV

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

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