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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
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 Computer ATM Office System Kiosk Expansion Upgrade Expansion Amount to be invested $756,868 $533,213 $273,441 Annual net cash flows: Year 1 376,000 267,000 162,000 Year 2 350,000 240,000 112,000 81,000 Year 3 320,000 214,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% Year 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 15%, 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 $ ON Amount to be invested $ Net present value $ $ 2. Determine a present value index for each proposal. If required, round your answers to two decimal places. Present Value Index Branch Office Expansion Computer System Upgrade Install Internet Bill-Pay 3. Which proposal offers the largest amount of present value per dollar of investment
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