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Oxford Company has limited funds available for investment and must ration the funds among five
competing projects. Selected information on the five 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, which to accept second, and so
on.
Required:
1. Compute the profitability index for each project. (Round your answers to 2 decimal places.)
Profitability
Project
Index
A 1.31 !
B 1.22 !
C 1.32 !
D 1.16 !
E 0.96 !
2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability
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Assignment Print View 2021-04-08, 1:41 PM
index.
References
Oxford Company has limited funds available for investment and must ration the funds among five
competing projects. Selected information on the five 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, which to accept second, and so
on.
Required:
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Assignment Print View 2021-04-08, 1:41 PM
1. Compute the profitability index for each project. (Round your answers to 2 decimal places.)
Profitability
Project
Index
A 1.31
B 1.22
C 1.32
D 1.16
E 0.96
2. In order of preference, rank the five projects in terms of (a) net present value, (b) profitability
index.
Explanation:
1.
The formula for the profitability index is:
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Assignment Print View 2021-04-08, 1:41 PM
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