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 Present value of Cash Inflows Life of the Project (years) Internal Rate of Return A $ 150,000 $ 274,323 7 15% B $ 129,000 $ 247,000 12 20% C $ 103,000 $ 205,035 7 19% D $ 160,000 $ 283,136 3 18% The net present values should be 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.