Question
In: Accounting
Oxford Company has limited funds available for investment and must ration the funds among five competing...
|
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 | $ | 480,000 | $ | 132,969 | 7 | ||||
| B | 405,000 | 126,000 | 12 | ||||||
| C | 300,000 | 105,105 | 7 | ||||||
| D | 525,000 | 114,408 | 3 | ||||||
| E | 450,000 | (26,088 | ) | 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. |
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Exercise 11-9 Preference Ranking of Investment Projects [LO11-3] Oxford Company has limited funds available for investment...
Exercise 11-9 Preference Ranking of Investment Projects
[LO11-3]
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
Net
Present
Value
Life of
the
Project
(years)
Internal
Rate
of Return
(percent)
A
$900,000
$319,400
6
21%
B
$770,000
$464,050
11
22%
C
$750,000
$338,750
6
24%
D
$950,000
$207,050...
Kopecky Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals....
Kopecky Industries Inc. is considering allocating a limited
amount of capital investment funds among four proposals. The amount
of proposed investment, estimated income from operations, and net
cash flow for each proposal are as follows:
Project
Name
Sierra
Tango
Uniform
Victor
Investment
$862,500
Investment
$2,025,000
Investment
$1,433,320
Investment
$1,040,013
Year
Income from
Operations
Net Cash Flows
Income from
Operations
Net Cash Flows
Income from
Operations
Net Cash Flows
Income from
Operations
Net Cash Flows
1
$80,500
$230,000
$279,000
$900,000
$180,000...
Company must choose which investments to pursue due to limited funds Computes the number of dollars...
Company must choose which investments to pursue due to limited
funds
Computes the number of dollars returned for every dollar
invested
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vehicles or new technology
The length of time it takes to recover the cost of the capital
outlay through net cash inflows
The difference between the present value of the investment’s net
cash inflows and the cost of the initial investment
Minimum rate that an investment must earn in...
Oxford Company has two divisions. Thames Division, which has an investment base of $81,900,000, produces and...
Oxford Company has two divisions. Thames Division, which has an
investment base of $81,900,000, produces and sells 1,000,000 units
of a product at a market price of $150 per unit. Its variable costs
total $47 per unit. The division also charges each unit $70 of
fixed costs based on a capacity of 1,050,000 units.
Lakes Division wants to purchase 300,000 units from Thames.
However, it is willing to pay only $144 per unit because it has an
opportunity to accept...
Oxford Company has two divisions. Thames Division, which has an investment base of $80,100,000, produces and...
Oxford Company has two divisions. Thames Division, which has an
investment base of $80,100,000, produces and sells 920,000 units of
a product at a market price of $146 per unit. Its variable costs
total $42 per unit. The division also charges each unit $70 of
fixed costs based on a capacity of 1,100,000 units.
Lakes Division wants to purchase 250,000 units from Thames.
However, it is willing to pay only $81 per unit because it has an
opportunity to accept...
Oxford Company has two divisions. Thames Division, which has an investment base of $80,500,000, produces and...
Oxford Company has two divisions. Thames Division, which has an
investment base of $80,500,000, produces and sells 920,000 units of
a product at a market price of $144 per unit. Its variable costs
total $40 per unit. The division also charges each unit $70 of
fixed costs based on a capacity of 1,000,000 units.
Lakes Division wants to purchase 230,000 units from Thames.
However, it is willing to pay only $80 per unit because it has an
opportunity to accept...
Oxford Company has two divisions. Thames Division, which has an investment base of $80,800,000, produces and...
Oxford Company has two divisions. Thames Division, which has an
investment base of $80,800,000, produces and sells 950,000 units of
a product at a market price of $145 per unit. Its variable costs
total $44 per unit. The division also charges each unit $70 of
fixed costs based on a capacity of 1,000,000 units.
Lakes Division wants to purchase 250,000 units from Thames.
However, it is willing to pay only $138 per unit because it has an
opportunity to accept...
Oxford Company has two divisions. Thames Division, which has an investment base of $80,600,000, produces and...
Oxford Company has two divisions. Thames Division, which has an
investment base of $80,600,000, produces and sells 950,000 units of
a product at a market price of $149 per unit. Its variable costs
total $40 per unit. The division also charges each unit $70 of
fixed costs based on a capacity of 1,000,000 units.
Lakes Division wants to purchase 240,000 units from Thames.
However, it is willing to pay only $142 per unit because it has an
opportunity to accept...
Oxford Company has two divisions. Thames Division, which has an investment base of $81,000,000, produces and...
Oxford Company has two divisions. Thames Division, which has an
investment base of $81,000,000, produces and sells 910,000 units of
a product at a market price of $149 per unit. Its variable costs
total $40 per unit. The division also charges each unit $71 of
fixed costs based on a capacity of 1,000,000 units.
Lakes Division wants to purchase 260,000 units from Thames.
However, it is willing to pay only $82 per unit because it has an
opportunity to accept...
Oxford Company has two divisions. Thames Division, which has an investment base of $81,000,000, produces and...
Oxford Company has two divisions. Thames Division, which has an
investment base of $81,000,000, produces and sells 940,000 units of
a product at a market price of $148 per unit. Its variable costs
total $40 per unit. The division also charges each unit $72 of
fixed costs based on a capacity of 1,000,000 units.
Lakes Division wants to purchase 230,000 units from Thames.
However, it is willing to pay only $80 per unit because it has an
opportunity to accept...
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