Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: Des MoinesCedar RapidsTotal present value of net cash flow$194,880 $254,100 Amount to be invested(203,000) (242,000) Net present value$(8,120) $12,100 a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places. Des MoinesCedar RapidsTotal present value of net cash flow$fill in the blank 1$fill in the blank 2Amount to be invested$fill in the blank 3$fill in the blank 4Present value index fill in the blank 5 fill in the blank 6b. Which location does your analysis support? (If both present value indexes are the same, either location will grade as correct.) , because the net present value index is 1.

Present value index = (Total present value of net cash flow/ Amount to be invested) a. Den Moines Cedar Rapids Total present value of net cash flow 1,94,880 2,54,100 Amount to be invested 2,03,000 2,42,000 Present value index (Total present value of net cash flow/ Amount to be invested) 0.96 1.05 b. Cedar Rapids, because the net present value index is higher.

Answered: Tasty Doughnuts has computed the net…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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	$194,880		$254,100
Amount to be invested	(203,000)		(242,000)
Net present value	$(8,120)		$12,100

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? (If both present value indexes are the same, either location will grade as correct.)

, because the net present value index is

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