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Net Present Value Method, Present Value Index, and Analysis United Bankshores, Inc. wishes to evaluate three capital investment proposals by using the net present value

Net Present Value Method, Present Value Index, and Analysis

United Bankshores, Inc. wishes to evaluate three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:

Branch Office Expansion Computer System Upgrade Install Internet Bill-Pay
Amount to be invested $527,952 $397,512 $206,060
Annual net cash flows:
Year 1 251,000 186,000 103,000
Year 2 233,000 167,000 71,000
Year 3 213,000 149,000 52,000

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

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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 Computer System Install Internet Expansion Upgrade Bill Pay Present value of net cash flow 683,060 X 960,278 X total Amount to be invested 125,254 X 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

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