Question

Present Value Index Dip N' Dunk Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: Boulder Ft. Collins $206,960 $225,150 Total present value of net cash flow (199,000) (237,000) Amount to be invested $7,960 $(11,850) Net present value a. Determine the present value index for each proposal. Round your answer for the present value index to two decimal places. Ft. Collins Boulder $ Total present value of net cash flow Amount to be invested Present value index b. Which location does your analysis support? (If both present value indexes are the same, either location will grade as correct.) because the net present value index is 1.

Answer 1

Ft. Coll Bou Total present value of net cash flow Amount to be invested $206,960 $199,000 $225,150 $237,000 (A) (B) Present value index (A B) 1.04 0.95 b Ft. Collins, because the net present value index is 1.04 Note: Present value index= Present value of inflow Present value of outflow