Columbia Railroad Company wishes to evaluate three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:

Instructions
1. 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 appearing in this chapter.
2. Determine a present value index for each proposal. Round to two decimal places.
3. Which proposal offers the largest amount of present value per dollar of investment?Explain.

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Route Expansion $840,000 Acquire Railcars New Maintenance Yard Amount to be invested Annual net cash flows: $490,000 $420,000 Year 1 ear 2 Year 3 420,000 380,000 350,000 225,000 200,000 180,000 210,000 200,000 180,000