Question: How do I find the Present Value Index with this information that is given? Krause Inc. is looking to invest in Project A or Project

How do I find the Present Value Index with this information that is given?

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 11%.

Project A

This project requires an initial investment of $167,500. The project will have a life of 6 years. Annual revenues associated with the project will be $130,000andexpenses associated with the project will be $35,000.

  1. Total present value of net cash flow=401,945
  2. Amount to be invested=$167,500
  3. Net present value=234,445

Project B

This project requires an initial investment of $137,500. The project will have a life of 4 years. Annual revenues associated with the project will be $111,000andexpenses associated with the project will be $60,000.

  1. Total present value of net cash flow=158,202
  2. Amount to be invested= $137,500
  3. Net present value=20,702

Present Value Index

Project A:

Project B:

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