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....

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:

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.

2.Determine a present value index for each proposal. If required, round your answers to two decimal places.

3.The   has the largest present value index. Although   has the largest net present value, it returns less present value per dollar invested than does the  , as revealed by the present value indexes. The present value index for the   is less than 1, indicating that it does not meet the minimum rate of return standard.