The profitability index method is a tool used in capital budgeting that is valuable when various investment opportunities are being considered. The method is sound because the considers the time value of money and it is useful to compare opportunities because it looks beyond the absolute size of tach investment. The company wants your assistance in determining which project to accept first, second, and so forth. Your matched tutor provides personalized help according to your question details. Payment is made only after you have completed your 1-on-1 session and are satisfied with your session. Studypool matches you to the best tutor to help you with your question.
Oxford Company has limited funds available for investment and… In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index.
7 Homework Help
The profitability index method measures the acceptability of a project through the ratio of the projected cash inflow to the initial investment. Learn about the definition and calculation of profitability index and understand how to interpret its results. The company requires a 10% rate of return on all new investments. 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. In the profitability index, we express the discounted cash flows as a percentage of the initial investment.
- The method is sound because the considers the time value of money and it is useful to compare opportunities because it looks beyond the absolute size of tach investment.
- In order of preference, rank the five projects in terms of (a) net present value, (b) profitability index.
- The profitability index method is a tool used in capital budgeting that is valuable when various investment opportunities are being considered.
- The company requires a 10% rate of return on all new investments.
- Your matched tutor provides personalized help according to your question details.
- In the profitability index, we express the discounted cash flows as a percentage of the initial investment.
