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Net present value method, present value index, and analysis for a service company Continental Railroad Company is evaluating three capital investment proposals by using the
Net present value method, present value index, and analysis for a service company
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:
Present Value of $ at Compound
Determine a present value index for each proposal. If required, round your answers to two decimal
places.
Present Value Index
Maintenance Equipment
Ramp Facilities
Computer Network
The
has the largest present value index. Although
net present value, it returns less present value per dollar invested than does th
by the present value indexes. The present value index for the
has the largest
as revealed
does not meet the minimum rate of return standard.
Assuming that the desired rate of return is prepare a net present value analysis for each proposal. Use the
present value of $ table above. If required, use the minus sign to indicate a negative net present value. If
required, round to the nearest dollar.
Maintenance Equipment Ramp Facilities Computer Network
Total present value of net cash flow
Less amount to be invested
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