Compute the project profitability index for each project

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Reference no: EM132514328

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 Net

Present      Value Life of the  Project (years)    Internal  Rate  of Return (percent)

A              $880,000            $434,360        7       24%

B               $685,000                $371,170     12      20%

C                   $580,000            $223,220       7    21%

D                       $780,000              $165,060   3    22%

  • 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.

Required:

Question 1. Compute the project profitability index for each project. (Round your answers to 2 decimal places.)

Question 2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.

Reference no: EM132514328

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