Present Value Index

Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows:

	Des Moines		Cedar Rapids
Total present value of net cash flow	$275,280		$380,160
Amount to be invested	(296,000)		(352,000)
Net present value	$(20,720)		$28,160

a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places.

	Des Moines	Cedar Rapids
Total present value of net cash flow	$fill in the blank 1	$fill in the blank 2
Amount to be invested	$fill in the blank 3	$fill in the blank 4
Present value index	fill in the blank 5	fill in the blank 6

b. Which location does your analysis support? (If both present value indexes are the same, either location will grade as correct.)

Des MoinesCedar Rapids

, because the net present value index is

less than greater than

1.