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: Instructions 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use the present value table appearing in Exhibit 2 of 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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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
BuyFind

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
Chapter 26, Problem 3PA
Textbook Problem

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:

Chapter 26, Problem 3PA, Net present value method, present value index, and analysis for a service company Continental

Instructions

  1. 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use the present value table appearing in Exhibit 2 of this chapter.
  2. 2. Determine a present value index for each proposal. (Round to two decimal places.)
  3. 3. Which proposal offers the largest amount of present value per dollar of investment? Explain.

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Chapter 26 Solutions

Financial And Managerial Accounting
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