Shenandoah Springs Company is considering two investment opportunities whose cash flows are provided below: $$\begin{array} { | l | r | r | }
\hline \text { Year } & \text { Investment } \mathrm { A } & \text { lnvestment B } \
\hline 0 & ( \$ 15,000 ) & ( \$ 9,000 ) \
\hline 1 & 5,000 & 5,000 \
\hline 2 & 5,000 & 4,000 \
\hline 3 & 5,000 & 3,000 \
\hline 4 & 4,000 & 1,000 \
\hline
\end{array}$$ The company's hurdle rate is 12%. What is the present value index of Investment B? (Do not round your PV factors and intermediate calculations.)

Question

Shenandoah Springs Company is considering two investment opportunities whose cash flows are provided below: $$\begin{array} { | l | r | r | } 
\hline \text { Year } & \text { Investment } \mathrm { A } & \text { lnvestment B } \
\hline 0 & ( \$ 15,000 ) & ( \$ 9,000 ) \
\hline 1 & 5,000 & 5,000 \
\hline 2 & 5,000 & 4,000 \
\hline 3 & 5,000 & 3,000 \
\hline 4 & 4,000 & 1,000 \
\hline
\end{array}$$ The company's hurdle rate is 12%. What is the present value index of Investment B? (Do not round your PV factors and intermediate calculations.)

Quizplus · Accepted Answer

The present value index is calculated by dividing the present value of cash inflows by the initial investment. For Investment B, the present value of cash inflows is approximately $10,440, and the initial investment is $9,000, resulting in a present value index of 1.16.

Shenandoah Springs Company Is Considering Two Investment Opportunities Whose Cash