APPLY THE CONCEPTS:Net present value and Present value index

Krause Inc. is looking to invest in Project A or Project B. The data surrounding each project is provided below. Krause's cost of capital is 10%.

Project A

This project requires an initial investment of $165,000. The project will have a life of 3 years. Annual revenues associated with the project will be $130,000andexpenses associated with the project will be $35,000.

Project B

This project requires an initial investment of $135,000. The project will have a life of 5 years. Annual revenues associated with the project will be $107,000andexpenses associated with the project will be $60,000.

Calculate thenet present valueand thepresent value indexfor each project using the present value tables provided below.

Present Value of $1 (a single sum) at Compound Interest.

Present Value of an Annuity of $1 at Compound Interest.

Note:

Use a minus sign to indicate a negative NPV.

If an amount is zero, enter "0".

Enter the present value index to 2 decimals.

fill in each section for both projects

Project A Project B

Total present value of net cash flow

Amount to be invested

Net present value

Present value index:Project A ??? Project B???