Findell Corporation is considering two projects, A and B, and it has gathered the following estimates for the projecTrue $$\begin{array} { | l | l | l | }
\hline & \text { Project } A & \text { Project } \mathrm { B } \
\hline \text { Useful life } & \text { 5 years } & 5 \text { years } \
\hline \text { Present value of cash inflows } & \$ 84,360 & \$ 55,100 \
\hline \text { Present value of cash inflows } & \$ 77,000 & \$ 49,000 \
\hline & & \
\hline
\end{array}$$ What is the present value index for project A?

Question

Findell Corporation is considering two projects, A and B, and it has gathered the following estimates for the projecTrue $$\begin{array} { | l | l | l | } 
\hline & \text { Project } A & \text { Project } \mathrm { B } \
\hline \text { Useful life } & \text { 5 years } & 5 \text { years } \
\hline \text { Present value of cash inflows } & \$ 84,360 & \$ 55,100 \
\hline \text { Present value of cash inflows } & \$ 77,000 & \$ 49,000 \
\hline & & \
\hline
\end{array}$$ What is the present value index for project A?

Quizplus · Accepted Answer

The present value index is calculated as the present value of cash inflows divided by the initial investment. For Project A, it is $84,360 / $77,000 = 1.096.

Findell Corporation Is Considering Two Projects, a and B, and It