Extracted 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.