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.
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
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Question
Present Value Index
Tasty Doughnuts has computed the
| 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.
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