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:

Present Value of $$1$ at Compound

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

The

has the largest present value index. Although$|$

net present value, it returns less present value per dollar invested than does th

by the present value indexes. The present value index for the

has the largest

$EE,$ as revealed

does not meet the minimum rate of return standard.

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

Less amount to be invested