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Net Present Value Method, Present Value Index, and Analysis First United Bank Inc. is evaluating three capital investment projects using the net present value method. Relevant data related to the projects are summarized as follows:   Branch Office Expansion Computer System Upgrade ATM Kiosk Expansion Amount to be invested $863,421   $519,486   $311,214   Annual net cash flows:               Year 1 358,000   243,000   165,000     Year 2 333,000   219,000   114,000     Year 3 304,000   194,000   83,000     Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1.  Assuming that the desired rate of return is 6%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.   Branch Office Expansion Computer System Upgrade ATM Kiosk Expansion Present value of net cash flow total $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 Amount to be invested $fill in the blank 4 $fill in the blank 5 $fill in the blank 6 Net present value $fill in the blank 7 $fill in the blank 8 $fill in the blank 9   2.  Determine a present value index for each proposal. If required, round your answers to two decimal places.   Present Value Index Branch Office Expansion fill in the blank 10 Computer System Upgrade fill in the blank 11 Install Internet Bill-Pay fill in the blank 12 3.  Which proposal offers the largest amount of present value per dollar of investment?

Net Present Value Method, Present Value Index, and Analysis First United Bank Inc. is evaluating three capital investment projects using the net present value method. Relevant data related to the projects are summarized as follows:   Branch Office Expansion Computer System Upgrade ATM Kiosk Expansion Amount to be invested $863,421   $519,486   $311,214   Annual net cash flows:               Year 1 358,000   243,000   165,000     Year 2 333,000   219,000   114,000     Year 3 304,000   194,000   83,000     Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1.  Assuming that the desired rate of return is 6%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.   Branch Office Expansion Computer System Upgrade ATM Kiosk Expansion Present value of net cash flow total $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 Amount to be invested $fill in the blank 4 $fill in the blank 5 $fill in the blank 6 Net present value $fill in the blank 7 $fill in the blank 8 $fill in the blank 9   2.  Determine a present value index for each proposal. If required, round your answers to two decimal places.   Present Value Index Branch Office Expansion fill in the blank 10 Computer System Upgrade fill in the blank 11 Install Internet Bill-Pay fill in the blank 12 3.  Which proposal offers the largest amount of present value per dollar of investment?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Net Present Value Method, Present Value Index, and Analysis

First United Bank Inc. is evaluating three capital investment projects using the net present value method. Relevant data related to the projects are summarized as follows:

  Branch
Office
Expansion		 Computer
System
Upgrade		 ATM
Kiosk
Expansion
Amount to be invested $863,421   $519,486   $311,214  
Annual net cash flows:            
  Year 1 358,000   243,000   165,000  
  Year 2 333,000   219,000   114,000  
  Year 3 304,000   194,000   83,000  

 

Present Value of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 0.890 0.826 0.797 0.756 0.694
3 0.840 0.751 0.712 0.658 0.579
4 0.792 0.683 0.636 0.572 0.482
5 0.747 0.621 0.567 0.497 0.402
6 0.705 0.564 0.507 0.432 0.335
7 0.665 0.513 0.452 0.376 0.279
8 0.627 0.467 0.404 0.327 0.233
9 0.592 0.424 0.361 0.284 0.194
10 0.558 0.386 0.322 0.247 0.162

Required:

1.  Assuming that the desired rate of return is 6%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.

  Branch Office Expansion Computer System Upgrade ATM Kiosk Expansion
Present value of net cash flow total $fill in the blank 1 $fill in the blank 2 $fill in the blank 3
Amount to be invested $fill in the blank 4 $fill in the blank 5 $fill in the blank 6
Net present value $fill in the blank 7 $fill in the blank 8 $fill in the blank 9

 

2.  Determine a present value index for each proposal. If required, round your answers to two decimal places.

  Present Value Index
Branch Office Expansion fill in the blank 10
Computer System Upgrade fill in the blank 11
Install Internet Bill-Pay fill in the blank 12

3.  Which proposal offers the largest amount of present value per dollar of investment?
 

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