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Donahue Industries Inc. wishes to evaluate three capital investment projects by using the net present value method. Relevant data related to the projects are summarized
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Donahue Industries Inc. wishes to evaluate three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows:
Product Line Expansion Distribution Facilities Computer Network Amount to be invested $790,052 $535,506 $310,018 Annual net cash flows: Year 1 413,000 301,000 186,000 Year 2 384,000 271,000 128,000 Year 3 351,000 241,000 93,000 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 20%, prepare a net present value analysis for each project. Use the present value of $1 table presented above in your computations. If the net present value is negative, enter a negative amount.
Product Line Expansion Distribution Facilities Computer Network Present value of net cash flow total $ $ $ Amount to be invested Net present value $ $ $ 2. Determine a present value index for each proposal. Round your answers to two decimal places.
Present Value Index (Rounded) Product Line Expansion Distribution Facilities Computer Network
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