The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net...
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The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year 1 2 3 4 5 6 1 2 3 Wind Turbines $410,000 410,000 410,000 410,000 The wind turbines require an investment of $1,170,550, while the biofuel equipment requires an investment of $1,915,860. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest ear 6% 10% 12% 15% 20% 0.893 0.870 0.833 1.690 1.626 1.528 2.402 2.283 2.106 3.037 2.855 2.589 3.605 3.353 2.991 4.111 3.785 3.326 Biofuel Equipment $740,000 740,000 740,000 740,000 0.943 0.909 1.833 1.736 2.673 2,487 3.465 3.170 4.212 3.791 4.917 4.355 7 8 9 10 Required: 5.582 6.210 6.802 7.360 4.868 4.564 5.335 4.968 5.759 5.328 6.145 5.650 Present value of annual net cash flows Amount to be invested Net present value 4.160 4.487 4.772 5.019 Wind Turbines Biofuel Equipment 3.605 3.837 4.031 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment 4.192 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year 1 2 3 4 5 6 1 2 3 Wind Turbines $410,000 410,000 410,000 410,000 The wind turbines require an investment of $1,170,550, while the biofuel equipment requires an investment of $1,915,860. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest ear 6% 10% 12% 15% 20% 0.893 0.870 0.833 1.690 1.626 1.528 2.402 2.283 2.106 3.037 2.855 2.589 3.605 3.353 2.991 4.111 3.785 3.326 Biofuel Equipment $740,000 740,000 740,000 740,000 0.943 0.909 1.833 1.736 2.673 2,487 3.465 3.170 4.212 3.791 4.917 4.355 7 8 9 10 Required: 5.582 6.210 6.802 7.360 4.868 4.564 5.335 4.968 5.759 5.328 6.145 5.650 Present value of annual net cash flows Amount to be invested Net present value 4.160 4.487 4.772 5.019 Wind Turbines Biofuel Equipment 3.605 3.837 4.031 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment 4.192 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent.
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To compute the net present value NPV for each project well discount the net cash flows at a rate of 10 using the present value of an annuity table pro... View the full answer
Related Book For
Financial and Managerial Accounting
ISBN: 978-1285866307
13th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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