Chapter 26 Homework 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 Equipment Ramp Facilities Computer Network Amount to be invested $974,820 $585,931 $303,569 Annual net cash flows: Year 1 431,000 293,000 194,000 134,000 Year 2 401,000 264,000 Year 3 366,000 234,000 97,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 0.694 N 0.890 0.826 0.797 0.756 0.840 0.751 0.712 0.658 0.579 3 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 n627 0.467 or 0.404 0.327 0.233 Chapter 26 Homework 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 12%, 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 has the largest present value Index. Although net present value, it returns less present value per dollar invested than does the by the present value indexes. The present value index for the does not meet the minimum rate of return standard has the largest as revealed is less than 1, indicating that it