
Concept explainers
1.
Net present value method is the method which is used to compare the initial
The net present value of each investment, using the present value of $1 table in Exhibit 2.
2.
Present value index:
Present value index is a technique, which is used to rank the proposals of the business. It is used by the management when the business has more investment proposals, and limited fund.
The present value index is computed as follows:
To calculate: The present value index of the investment proposals.
3.
To explain: The proposal that offers the largest amount of present value per dollar of investment.

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Chapter 25 Solutions
CengageNOWv2, 2 terms Printed Access Card for Warren/Reeve/Duchac’s Financial & Managerial Accounting, 14th
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