Prepare a net present value analysis for each project

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Problem - Net present value method, present value index, and analysis

Evergreen Security Bank, 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:


Branch Office Expansion

Computer System Upgrade

Install Internet Bill-Pay

Amount to be invested

$425,000

$650,000

$360,000

Annual net cash flows:




Year 1

230,000

325,000

175,000

Year 2

210,000

300,000

155,000

Year 3

170,000

290,000

120,000

Instructions -

1. Assuming that the desired rate of return is 15%, prepare a net present value analysis for each project.

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.

Reference no: EM132690547

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