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:

		Branch Office Expansion		Computer System Upgrade		ATM Kiosk Expansion
Amount to be invested		$853,236		$564,441		$297,352
Annual net cash flows:
	Year 1	333,000		243,000		153,000
	Year 2	310,000		219,000		106,000
	Year 3	283,000		194,000		77,000

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 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 $ $ $ Less amount to be invested: $ $ $ Net present value 2. 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 3. Which project offers the largest amount of present value per dollar of investment? Computer System Upgrade