Question

Oxford Company has limited funds available for investment and mustration the funds among four competing projects. Selected information on the four projects follows: Project Investment Required $890,000 $690,000 $590,000 $790,000 Life of Net the Internal Present Project Rate Value (years) of Return $459,687 $227,448 $279,681 8 $159,067 230 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: 1. Compute the project profitability index for each project. 2 In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the project profitability index for each project. (Round your answers to 2 decimal places.) Project Project Profitability Index

Answer 1

Project profitability index = Net present value /investment required

Project	Project profitability index
A (459,687/890,000)	0.52
B (227,448/690,000)	0.33
C (279,681/590,000)	0.47
D (159,067/790,000)	0.20

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