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 $712,500     $848,000     Amount to be invested (750,000)  (800,000)  Net present value $(37,500)  $ 48,000     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? Des Moines , because the net present value index is greater than  1.

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 12E
icon
Related questions
Question

Present Value Index

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 $712,500     $848,000    
Amount to be invested (750,000)  (800,000) 
Net present value $(37,500)  $ 48,000  

 

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?
Des Moines , because the net present value index is greater than  1.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Accounting for Borrowing costs
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT