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Homework Answers
1a) Net present value
| Wind Turbines | Biofuel equipment | |
| Present value of annual net cash flows | 390000*3.791 = 1478490 | 820000*3.791 = 3108620 |
| Less Amount to be invested | -1113450 | -2122980 |
| Net present value | 365040 | 985640 |
1bb) Present value index
Wind turbines = 1478490/1113450 = 1.33
Biofuel Equipment = 3108620/2122980 = 1.46
Calculate IRR
| Wind turbines | Biofuel Equpment | |
| Present value factor | 1113450/390000 = 2.855 | 2122980/820000 = 2.589 |
| IRR | 15% | 20% |
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