Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: Des Moines Cedar Rapids Total present value of net cash flow $194,880 $254,100 Amount to be invested (203,000) (242,000) Net present value $(8,120) $12,100 a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places. Des Moines Cedar Rapids Total present value of net cash flow $fill in the blank 1 $fill in the blank 2 Amount to be invested $fill in the blank 3 $fill in the blank 4 Present value index fill in the blank 5 fill 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.) , because the net present value index is 1.
Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: Des Moines Cedar Rapids Total present value of net cash flow $194,880 $254,100 Amount to be invested (203,000) (242,000) Net present value $(8,120) $12,100 a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places. Des Moines Cedar Rapids Total present value of net cash flow $fill in the blank 1 $fill in the blank 2 Amount to be invested $fill in the blank 3 $fill in the blank 4 Present value index fill in the blank 5 fill 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.) , because the net present value index is 1.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 11P
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Tasty Doughnuts has computed the
Des Moines | Cedar Rapids | |||
Total present value of net |
$194,880 | $254,100 | ||
Amount to be invested | (203,000) | (242,000) | ||
Net present value | $(8,120) | $12,100 |
a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places.
Des Moines | Cedar Rapids | |
Total present value of net cash flow | $fill in the blank 1 | $fill in the blank 2 |
Amount to be invested | $fill in the blank 3 | $fill in the blank 4 |
Present value index | fill in the blank 5 | fill 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.)
, because the net present value index is
1.
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