Question

8. 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
($33,000 Investment)					($33,000 Investment)
Year	Cash Flow				Year	Cash Flow
1	$	8,000			1	$	15,000
2		11,000			2		17,000
3		17,000			3		16,000
4		19,000

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 12 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.)

	Project E Project H

15.Myers Business Systems is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given next:

  

Possible Market Reaction	Sales in Units			Probabilities
Low response		10			.20
Moderate response		50			.30
High response		70			.40
Very high response		90			.10

a. What is the expected value of unit sales for the new product? (Do not round intermediate calculations and round your answer to the nearest whole unit.)

b.What is the standard deviation of unit sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1