Net Present Value Method, Present Value Index, and Analysis Donahue Industries Inc. wishes to evaluate...
80.2K
Verified Solution
Link Copied!
Question
Accounting
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
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
