Exercise $7-11($Algo$)$ Preference Ranking of Investment Projects $[$LO$7-5]$

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 $ $170,000$ $ $289,323717\%$

B $ $122,000$ $ $262,0001222\%$

C $ $102,000$ $ $220,035721\%$

D $ $164,000$ $ $298,136320\%$

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:

Compute the profitability index for each project.

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