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 E Project H ($23,000 Investment) ($25,000 Investment) Year Cash Flow Year Cash Flow 1 $ 7,000 1 $ 19,000 2 10,000 2 10,000 3 11,000 3 9,000 4 14,000 a. Determine the net present value of the projects based on a zero percent discount rate. b. Determine the net present value of the projects based on a discount rate of 10 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.) c. If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 10 percent?

Determine the net present value of the projects based on a zero percent discount rate.

For Project E and H

Determine the net present value of the projects based on a discount rate of 10 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.)

If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 10 percent?

Answer 1

Solution :-