Assuming that the desired rate of return is 15%, 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 $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 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
Assuming that the desired rate of return is 15%, 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 $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 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
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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 follows:
| Maintenance Equipment |
Ramp Facilities |
Computer Network |
|||||
| Amount to be invested | $909,173 | $541,268 | $278,555 | ||||
| Annual net cash flows: | |||||||
| Year 1 | 405,000 | 284,000 | 178,000 | ||||
| Year 2 | 377,000 | 256,000 | 123,000 | ||||
| Year 3 | 344,000 | 227,000 | 89,000 |
| Present Value of $1 at |
|||||
| 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
| 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 |
| 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.
| 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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