Question

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project H ($21,000 Investment) Project E ($22,000 Investment) Year Cash Flow Year Cash Flow $6,000 7,000 8,000 11,000 $15,000 6,000 5,000 1. 1 2 2 3 4 a. Determine the net present value of the projects based on a zero percent discount rate Net Present Value Project E Project H b. Determine the net present value of the projects based on a discount rate of 10 percent. (Do not round Intermedlate calculations and round your answers to 2 declmal places.) Net Present Value Project E Project H

Answer 1

D5 X Fox PVF @ 0% A B B C D E F G H I J K L M N O P Q R Yr PVF @ 0% PVF @ 0% Project E If Discount Rate = 0% Cash Flow -22,000 6,000 7,000 8,000 11,000 | PV of CF -22,000 6,000 7,000 8,000 11,000 10,000 Project H If Discount Rate = 0% Yr C ash Flow 0 -21,000 15,000 6,000 5,000 PV of CF -21,000 15,000 6,000 5,000 5,000 NPV Project E If Discount Rate = 10% Cash Flow -22,000 6,000 7,000 8,000 11,000 PVF @ 10% 1 0.9091 0.8264 0.7513 0.6830 NPV PV of CF -22,000 5,455 5,785 6,011 Project H If Discount Rate = 10% | Cash Flow 0 -21,000 i 15,000 2 6,000 5,000 PVF @10% 1 0.9091 0.8264 0.7513 NPV PV of CF -21,000 13,636 4,959 3,757 1,352 7,513 2,763 ... Discounted PBP Sheet10C ... 22:40 gAANO ENG 30 29-11-2019 21