Present value index OBJ. 3 Dip N’ Dunk Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows:

Ft. Collins Boulder Total present value of net cash flow $607,600 $624,000 Less amount to be invested 620,000 600,000 Net present value $(12,400) $ 24,000

a. Determine the present value index for each proposal.

b. Which location does your analysis support? Explain.