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.
- Total present value of net cash flow=401,945
- Amount to be invested=$167,500
- 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.
- Total present value of net cash flow=158,202
- Amount to be invested= $137,500
- Net present value=20,702
Present Value Index
Project A:
Project B:
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