Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant...
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Accounting
Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows:
Line Item DescriptionDes MoinesCedar RapidsTotal present value of net cash flow$230,300 $288,400 Amount to be invested(235,000)(280,000)Net present value$(4,700)$8,400
a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places.
Line Item DescriptionDes MoinesCedar RapidsTotal present value of net cash flow$fill in the blank 1$fill in the blank 2Amount to be investedfill in the blank 3fill in the blank 4Present value indexfill in the blank 5fill in the blank 6
b. Which location does your analysis support? (If both present value indexes are the same, either location will grade as correct.)
Des MoinesCedar Rapids
, because the net present value index is
less thangreater than
1.
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