Net present value method, present value index, and analysis OBJ. 3 for a service company First United Bank Inc. is evaluating three capital investment projects by 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $420,000 $350,000 $520,000 Annual net cash flows:

Year 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 190,000 275,000 Year 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000 180,000 250,000 Year 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000 170,000 250,000 Instructions 1. Assuming that the desired rate of return is 15%, prepare a net present value analysis for each project. Use the present value of $1 table appearing in this chapter (Exhibit 2).
2. Determine a present value index for each project. Round to two decimal places.
3. Which project offers the largest amount of present value per dollar of investment? Explain.