Question

ABC Company has calculated the net present value of two investment opportunities but must decide which option to pursue: Project X: Present value of cash flows = $117,000 Investment = $100,000 Net present value = $17,000 Project Z: Present value of cash flows = $138,000 Investment = $120,000 Net present value = $18,000 Complete the following: Present value ratio of Project X =_________ Present value ratio of Project Z = __________

Decision = Invest in _______(Project X/Project

Answer 1

The present value ratio of Project X is 1.17 and the present value ratio of Project Z is 1.15. Project X has a higher present value ratio and is the recommended investment option.

Step-by-step explanation:

The present value ratio of Project X is $117,000 divided by $100,000, which equals 1.17. The present value ratio of Project Z is $138,000 divided by $120,000, which equals 1.15. To make a decision on which project to invest in, you can compare the present value ratios. In this case, Project X has a higher present value ratio, indicating that it is the better investment option.

1