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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 Ramp Computer Equipment Facilities Network Amount to be invested 5901,007 5549,541 $271,645 Annual net cash flows: Year 1 359,000 241,000 154.000 Year 2 334,000 217,000 106,000 Year 3 305,000 193,000 77,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% Year 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. 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 3. The as revealed by the present value indexes. The present value index for the has the largest present value index. Although has the largest net present value, it returns less present value per dollar invested than does the is less than 1, indicating that it does not meet the minimum rate of return standard
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