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How do I compute the excess present value index for each of the five proposals? (Rounding answers to three decimal places).

How do I compute the excess present value index for each of the five proposals? (Rounding answers to three decimal places).

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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How do I compute the excess present value index for each of the five proposals? (Rounding answers to three decimal places).

Excess Present Value Index and Average Rate of Return A Dashboard O Bradle Luoddns a Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment A $265,000 $305,030 $37,400 195,000 231,780 26,000 155,000 168,040 19,200 175,000 211,300 27,600 123,000 131,990 14,960 a. Compute the excess present value index for each of the five proposals. Round answers to three decimal places. Proposal Excess PV Index D E b. Compute the average rate of return for each of the five proposals. Round answers to one decimal place. For example, 0.4567 equals 45.7% Proposal Avg, Rate of Return 0 9% 0 % 0 % 0%
Transcribed Image Text:Excess Present Value Index and Average Rate of Return A Dashboard O Bradle Luoddns a Highpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment A $265,000 $305,030 $37,400 195,000 231,780 26,000 155,000 168,040 19,200 175,000 211,300 27,600 123,000 131,990 14,960 a. Compute the excess present value index for each of the five proposals. Round answers to three decimal places. Proposal Excess PV Index D E b. Compute the average rate of return for each of the five proposals. Round answers to one decimal place. For example, 0.4567 equals 45.7% Proposal Avg, Rate of Return 0 9% 0 % 0 % 0%
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pv index= pv of cash inflows /pv of cash outlfows
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