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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:

Maintenance Equipment Ramp Facilities Computer Network
Amount to be invested $786,082 $496,107 $229,569
Annual net cash flows:
Year 1 326,000 238,000 137,000
Year 2 303,000 214,000 95,000
Year 3 277,000 190,000 69,000

Present Value of $1 at Compound Interest
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 10%, 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.

Maintenance Equipment Ramp Facilities Computer Network
Total present value of net cash flow
Amount to be invested
Net present value

2. 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

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