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

(a)        net present value.

(b)        Project profitability index.

(c)        Internal rate of return.

3.         Which ranking do you prefer? Why?

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Life of Internal Net the Rate of Investment Present Project Project Required Value (years) (percent) A $160,000 $44,323 18% B $135,000 $42,000 12 16% S100,000 S35,035 20% $38,136 $175,000 22%