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?
  

	Project E
	Project H
	Both H and E

Answer 1