Question

Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows:

Project	Investment Required			Net Present Value			Life of the Project (years)
A	$	543,000		$	188,900			7
B		560,000			135,900			12
C		379,000			105,300			7
D		605,000			208,600			3
E		484,000			(59,300	)		6

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, which to accept second, and so on.

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

      

2.	In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index.

Answer 1