West Coast 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:

Instructions

1. 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 appearing in this chapter.

2. Determine a present value index for each project. Round to two decimal places.

3. Which project offers the largest amount of present value per dollar of investment? Explain.

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EZ Notorious Short Expansion Facilities Network Amount to be invested $2,000,000 $1,250,000 $250,000 Annual net cash flows: Year 1 2,100,000 500,000 300,000 Year 2 1,800,000 600,000 300,000 Year 3 1,500,000 650,000 275,000