prepare a net present value analysis for each proposal.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![5
0.747
0.621
0.567
0.497
0.402
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff8c879c5-4abd-41e0-a23b-c4f185aff8d4%2F6b4b56d3-308d-4394-99d3-7cd417506fe9%2F443uuq9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5
0.747
0.621
0.567
0.497
0.402
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
![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
$793,083
$482,728
$224,858
Annual net cash flows:
Year 1
303,000
218,000
127,000
Year 2
282,000
196,000
88,000
Year 3
258,000
174,000
64,000
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
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
0.747
0.621
0.567
0.497
0.402
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff8c879c5-4abd-41e0-a23b-c4f185aff8d4%2F6b4b56d3-308d-4394-99d3-7cd417506fe9%2Fp7iz1of_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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
$793,083
$482,728
$224,858
Annual net cash flows:
Year 1
303,000
218,000
127,000
Year 2
282,000
196,000
88,000
Year 3
258,000
174,000
64,000
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
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
0.747
0.621
0.567
0.497
0.402
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
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