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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 Which

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 $8,000,000 $20,000,000 $9,000,000
Annual net cash flows:      
 Year 1 4,000,000 12,000,000 6,000,000
 Year 2 3,500,000 10,000,000 5,000,000
 Year 3 2,500,000 9,000,000 4,000,000

Instructions


Which proposal offers the largest amount of present value per dollar of investment? Explain.

 

Here is a tip:

Present value index represents the present value of return  per dollar investment. 

May 15 2021 View more View Less

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