Present value index: Present value index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals, and limited fund. The present value index is computed as follows: Present value index = Total present value of net cash flow Amount to be invested To determine: The present value index for each proposal.

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Chapter 11, Problem 12E

(a)

To determine

Present value index:

Present value index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals, and limited fund.

The present value index is computed as follows:

Present value index =Total present value of net cash flowAmount to be invested

To determine: The present value index for each proposal.

(b)

To determine

To analysis: The investment location which is favor to investment.

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