Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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
Office
Expansion Computer
System
Upgrade ATM
Kiosk
Expansion
Amount to be invested $655,156 $499,690 $267,396
Annual net cash flows:
Year 1303,000209,000142,000
Year 2282,000188,00098,000
Year 3258,000167,00071,000
Present Value of $1 at Compound Interest
Year 6%10%12%15%20%
10.9430.9090.8930.8700.833
20.8900.8260.7970.7560.694
30.8400.7510.7120.6580.579
40.7920.6830.6360.5720.482
50.7470.6210.5670.4970.402
60.7050.5640.5070.4320.335
70.6650.5130.4520.3760.279
80.6270.4670.4040.3270.233
90.5920.4240.3610.2840.194
100.5580.3860.3220.2470.162
Required:
1. Assuming that the desired rate of return is 6%, prepare a net present value analysis for each project. 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
Less 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 project. 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 project 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:
Required:
Determine a present value index for each project. If required, round your answers to two decimal places.
Present Value Index
Branch Office Expansion
Computer System Upgrade
Install Internet Bill-Pay
Which project offers the largest amount of present value per dollar of investment?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Management Measuring Monitoring And Motivating Performance

Authors: Leslie G. Eldenburg, Susan Wolcott

1st Edition

0471205494, 978-0471205494

More Books

Students also viewed these Accounting questions