Question

Hello, I am struggling with this homework problem for my accounting class. Thank you for the help!

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 $604,905 $378,836 $182,593 Amount to be invested Annual net cash flows: Year 1 Year 2 275,000 256,000 234,000 195,000 176,000 156,000 121,000 83,000 61,000 Year 3 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0 .893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.658 0.579 0.572 0.482 0.402 0.840 0.792 0.747 0.705 0.665 0.627 0.592 .558 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.712 0.636 0.567 0.507 0.452 0.404 0.404 0.361 0.322 0.335 0.279 0.432 0.376 0.327 0.284 0.247 0.233 0.194 0.162 10 0

Answer 1

1
	Maintenance Equipment	Ramp facilities	Computer Network
Total present value of net cash flows	586758	405354	208156
Amount to be invested	604905	378836	182593
Net present value	-18147	26518	25563
2
	Present value index
Maintenance Equipment	0.97	=586758/604905
Ramp facilities	1.07	=405354/378836
Computer Network	1.14	=208156/182593