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.
a. Calculate the net present value of each investment opportunity.
b. Calculate the present value index for each investment opportunity.
c. Indicate which investment will produce the higher rate of return.