Project 1 requires an original investment of $375,000. The project will yield cash flows of $90,000 per year for 8 years. Project 2 has a computed net present value of $50,000 over a 6-year life. Project 1 could be sold at the end of 6 years for a price of $40,000. 

(a) Using the present value tables in Exhibits 2 and 5, determine the net present value of Project 1 over a 6-year life, with residual value, assuming a minimum rate of return of 10%. 

(b) Which project provides the greatest net present value?

Exhibits 2

Exhibits 5

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Year 1234567890 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 Present Value of $1 at Compound Interest 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 Exhibit 2 Partial Present Value of $1 Table