Question

11. The Capital Fund for research project investment at Canes Engineering is limited to $100,000 for next year. Select any or all of the following proposals if a MARR of 10% per year is established by the Board of Directors. These are independent projects. Project Life in years Salvage Value, Initial Investment Annual Net Cash Flow, S/year 6,000 9,000 15,000 -25.000 -30,000 -90.000 4 4 4 4.000 -1,000 20,000

please solve and show all work for a good review.

Answer 1

Answer:

NONE

All 3 projects have negative NPV as follows. As such all 3 projects have to be rejected.

Project NPV (3,248.75) (2,154.22) (28,791.75)

Working:

Project A Year 4 Year Initial Investment Year 0 Year 1 to Year 4 (25,000) Annual Net cash flow 6,000 Salvage value 4,000 (25,000) 4,000 6,000 3.16987 Total cash flow PV of $1 annuity for 4 years at 10% rate PV of $1 for 4 years at 10% rate PV of cash flows NPV 0.68301 2,732.05 19,019.19 (25,000.00) (3,248.75) Project B Year 4 Year Initial Investment Year 0 Year 1 to Year 4 (30,000) Annual Net cash flow 9,000 Salvage value (1,000) (30,000) (1,000) 9,000 3.16987 Total cash flow PV of $1 annuity for 4 years at 10% rate PV of $1 for 4 years at 10% rate PV of cash flows NPV 0.68301 (683.01) 28,528.79 0.79 (30,000.00) (2,154.22) Project C Year Year 4 Year 0 Year 1 to Year 4 (90,000) Initial Investment Annual Net cash flow 15,000 Salvage value 20,000 (90,000) 20,000 15,000 3.16987 Total cash flow PV of $1 annuity for 4 years at 10% rate PV of $1 for 4 years at 10% rate PV of cash flows NPV 0.68301 13,660.27 47,547.98 (90,000.00) (28,791.75)