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PR 25-3A Net present value method, present value index, and analysis Northern Highlands Railroad Company is evaluating three capital investment propo by using the net present value method. Relevant data related to the proposals are s marized as follows: New Maintenance Route Acquire Railcars Yard Expansion Amount to be invested $7,000,000 $16,000,000 $10,000,000 Annual net cash flows: Year 1 5,000,000 10,000,000 5,000,000 Year 2 4,000,000 9,000,000 4,000,000 Year 3 4,000,000 7,000,000 4,000,000 Instructions 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis each proposal. Use the present value of $1 table appearing in this chapter (Exhibit 2. Determine a present value index for each proposal. Round to two decimal place -Which proposal offers the largest amount of present value per dollar o 3. vestment? Explain.

PR 25-3A Net present value method, present value index, and analysis Northern Highlands Railroad Company is evaluating three capital investment propo by using the net present value method. Relevant data related to the proposals are s marized as follows: New Maintenance Route Acquire Railcars Yard Expansion Amount to be invested $7,000,000 $16,000,000 $10,000,000 Annual net cash flows: Year 1 5,000,000 10,000,000 5,000,000 Year 2 4,000,000 9,000,000 4,000,000 Year 3 4,000,000 7,000,000 4,000,000 Instructions 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis each proposal. Use the present value of $1 table appearing in this chapter (Exhibit 2. Determine a present value index for each proposal. Round to two decimal place -Which proposal offers the largest amount of present value per dollar o 3. vestment? Explain.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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25-3A PR 25-3A Net present value method, present value index, and analysis OBJ. 3 Northern Highlands Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are sum- marized as follows: New Maintenance Acquire Railcars Route Yard Expansion Amount to be invested $7,000,000 $16,000,000 $10,000,000 Annual net cash flows: Year 1 5,000,000 10,000,000 5,000,000 Year 2 4,000,000 9,000,000 4,000,000 Year 3 4,000,000 7,000,000 4,000,000 Instructions 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use the present value of $1 table appearing in this chapter (Exhibit 1). 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 in- vestment? Explain.
Transcribed Image Text:25-3A PR 25-3A Net present value method, present value index, and analysis OBJ. 3 Northern Highlands Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are sum- marized as follows: New Maintenance Acquire Railcars Route Yard Expansion Amount to be invested $7,000,000 $16,000,000 $10,000,000 Annual net cash flows: Year 1 5,000,000 10,000,000 5,000,000 Year 2 4,000,000 9,000,000 4,000,000 Year 3 4,000,000 7,000,000 4,000,000 Instructions 1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use the present value of $1 table appearing in this chapter (Exhibit 1). 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 in- vestment? Explain.
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