Dag's frozen pizza has computed the net present value for capital expenditures at two locations. Relevant data are as follows:

_ _ _ _ _ __ _ _ __ Bumpy * Transylvania

PV of cash flows $712,000 * $848,000

Amount invested (750,000) * (800,000)

Net Present Value $(37,500) * $48,000

Asterisks (*) are used to help align the numbers within the table.

Calculate the present value index for each proposal. State which location Dag should invest in (if either one) and what is its present value index?

Invest in Bumpy, PVI = 0.91

Invest in Transylvania, PVI = 1.06

Invest in neither location, PVI <1.0

Invest in both locations, PVI for both >0.90