Net Present Value Method Present Value Index And Analysis Northern Highlands Rai

Net Present Value MethodPresent Value Index, and Analysis

Northern Highlands 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:

Present Value of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.69430.8400.7510.7120.6580.57940.7920.6830.6360.5720.48250.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.27980.6270.4670.4040.3270.23390.5920.4240.3610.2840.194100.5580.3860.3220.2470.162Required:

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 above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.

 New Maintenance YardRoute ExpansionAcquire RailcarsPresent value of net cash flow total$ $ $ Less amount to be invested$ $ $ Net present value$ $ $ 

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

 Present Value IndexNew Maintenance Yard Route Expansion Acquire Railcars 3. The Selectnew maintenance yardroute expansionrailcars

Item 13  has the largest present value index. Although Selectnew maintenance yardroute expansionrailcars

Item 14  has the largest net present value, it returns less present value per dollar invested than does the Selectnew maintenance yardroute expansionrailcars

Item 15 , as revealed by the present value indexes. The present value index for acquiring the Selectnew maintenance yardroute expansionrailcars

Item 16  is less than 1, indicating that it does not meet the minimum rate of return standard.

1. Present value = cash flow*present value of $1 at 6% as the desired rate of return = 6%. Also,please note that PV factor for year 0 = 1.(PV of 1st year cash flow of branch office expansion…

Stuck With A Lot Of Homework Assignments And Feeling Stressed ? Take Professional Academic Assistance & Get 100% Plagiarism Free Papers

Get Help By Expert

For students who are struggling with essay writing, we can be a lifesaver. We offer essay writing help for students of all levels, from elementary school to college. Our team of experienced assignment writers can help you with any type of essay, from persuasive essays to comparative essays. So if you're struggling with essay writing, don't hesitate to contact us for assistance.


Looking For Plagiarism Free Answers For Your College/ University Assignments.