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Oxford Company has limited funds available for investment and must ration the funds among four...

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Accounting

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 profitability index for each project.

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

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