Answer and Explanation:
a. The computation of the present value index for each proposal is given below:
As we know that
Present value index = Present Value of net cash Flow ÷ Amount invested
Therefore for each projects, it is
Particulars Des Moines Cedar Rapids
Total present value of
net cash flow (A) $712,500 $848,000
Amount invested (B) $750,000 $800,000
Present value index (A ÷ B) 0.95 1.06
b. Based on the present value index, Cedar Rapids would be needed the analysis support as it has the high present value index