Net Present Value Method, Present Value Index, and Analysis

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		$700,434		$438,165		$256,697
Annual net cash flows:
	Year 1	359,000		244,000		154,000
	Year 2	334,000		220,000		106,000
	Year 3	305,000		195,000		77,000

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