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Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as

Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:

Line Item Description Maintenance Equipment Ramp Facilities Computer Network
Amount to be invested $685,231 $448,207 $217,917
Annual net cash flows:
Year 1 273,000 202,000 128,000
Year 2 254,000 182,000 88,000
Year 3 232,000 162,000 64,000

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 proposal. 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.

Line Item Description Maintenance Equipment Ramp Facilities Computer Network
Total present value of net cash flow $fill in the blank 1 $fill in the blank 2 $fill in the blank 3
Less amount to be invested fill in the blank 4 fill in the blank 5 fill in the blank 6
Net present value $fill in the blank 7 $fill in the blank 8 $fill in the blank 9

2. Determine a present value index for each proposal. If required, round your answers to two decimal places.

Line Item Description Present Value Index
Maintenance Equipment fill in the blank 10
Ramp Facilities fill in the blank 11
Computer Network fill in the blank 12

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