SURVEY OF ACCOUNTING(LL)>CUSTOM PKG.<
SURVEY OF ACCOUNTING(LL)>CUSTOM PKG.<
5th Edition
ISBN: 9781264010653
Author: Edmonds
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 16, Problem 7E

Exercise 10-7A Using the present value index

Rolla Company has a choice of two investment alternatives. The present value of cash inflows and outflows for the first alternative is $125,000 and $100,000, respectively. The present value of cash inflows and outflows for the second alternative is $300,000 and $262,500, respectively.

Required

Round your computation to two decimal points.

  1. a. Calculate the net present value of each investment opportunity.
  2. b. Calculate the present value index for each investment opportunity.
  3. c. Indicate which investment will produce the higher rate of return.
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Chapter 16 Solutions

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