Continental Railroad Company is evaluating three capital investment proposals 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 $8,000,000 $20,000,000 $9,000,000 Annual net cash flows: Year 1 4,000,000 12,000,000 6,000,000 Year 2 3,500,000 10,000,000 5,000,000 Year 3 2,500,000 9,000,000 4,000,000 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 20%, 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 Present value of net cash flow total $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. Present Value Index Maintenance Equipment fill in the blank 10 Ramp Facilities fill in the blank 11 Computer Network fill in the blank 12
Continental Railroad Company is evaluating three capital investment proposals 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 $8,000,000 $20,000,000 $9,000,000 Annual net cash flows: Year 1 4,000,000 12,000,000 6,000,000 Year 2 3,500,000 10,000,000 5,000,000 Year 3 2,500,000 9,000,000 4,000,000 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 20%, 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 Present value of net cash flow total $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. Present Value Index Maintenance Equipment fill in the blank 10 Ramp Facilities fill in the blank 11 Computer Network fill in the blank 12
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 4PA: Net present value method, internal rate of return method, and analysis for a service company The...
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Continental Railroad Company is evaluating three capital investment proposals using the
Maintenance Equipment | Ramp Facilities | Computer Network | |||
Amount to be invested | $8,000,000 | $20,000,000 | $9,000,000 | ||
Annual net cash flows: | |||||
Year 1 | 4,000,000 | 12,000,000 | 6,000,000 | ||
Year 2 | 3,500,000 | 10,000,000 | 5,000,000 | ||
Year 3 | 2,500,000 | 9,000,000 | 4,000,000 |
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 | |
Present value of net cash flow total | $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.
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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