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

Vidor Transylvania

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

Amount of Investment (750,000) (800,000)

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

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?

2. The following financial information on Beastie's two divisions is as follows:

Upper Lower

Revenues $850,000 $700,000

Operating Expenses 470,000 460,000

Operating Income $380,000 $240,000

3. The following financial information on Beastie's two divisions is as follows:

Upper Lower

Revenues $850,000 $700,000

Operating Expenses 470,000 460,000

Operating Income $380,000 $240,000

Assets Invested $2,000,000 $1,100,000

What is the Investment Turnover for the Upper Division?

Assets Invested $2,000,000 $1,100,000

Minimum acceptable Operating Income as percent of Invested assets = 12%.

What is the residual income for the Lower Division?