Present Value Index Dip N Dunk Doughnuts has computed the ne

Present Value Index Dip N\' Dunk Doughnuts has computed the net present value for capit al expendture at two locations. Relevant data related to the computation are Fort Collins Boulder 291,500 $304,110 275,000) (327,000) 16,500 (22,890) Total present value of net cash flow Net present value a. Determine the present value index for each proposal. Round your answer for the present value index to two decimal places Boulder Total present value of net cash flow Amount to be invested Present value index b. Which location does your analvsis support? (if both present value indexes are the same, elther location will grade as correct.) Fort Collis a. Divide the total present value of the net cash flow by the amount to be invested. b. What does the present value index indicate about the net present value? Prevvous Next for Grading SAMSUNG

Solution

a)

The following table shows the calculations

b)

As per my analysis, Fort Collins should be selected as the Profitability Index is more than 1 which represents positive Net Present Value while the PI of less than 1 (Boulder) represents negative Net Present Value

Calculations	Particulars	Fort collins	Boulder
A	Total present value of net cash flows	291,500	304,110
B	Amount to be invested	275,000	327,000
C = A / B	Present value index	1.06	0.93