Keller Construction is considering two new investments. Project E calls for the purchase of earth moving equipment.
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Question:
Keller Construction is considering two new investments. Project E calls for the purchase of earth moving 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.
Project E | Project H | |||||
($41,000 investment) | ($42,000 investment) | |||||
Year | Cash flow | Year | Cash flow | |||
1 | $ 11,000 | 1 | $ 23,000 | |||
2 | 16,000 | 2 | 17,000 | |||
3 | 22,000 | 3 | 15,000 | |||
4 | 24,000 | |||||
(a) | Determine the net present value of the projects based on a zero discount rate. (Omit the "$" sign in your response.) |
(b) | Determine the net present value of the projects based on a 9 percent discount rate. (Round "PV Factors" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) |
Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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