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 ($ 42,000 Investment) Year Cash Flow 1 $10,000 2 15,000 3 21,000 4 23,000 Project H ( $40,000 Investment) Year Cash Flow 1 $21,000 2 16,000 3 14,000 a. Determine the net present value of the projects based on a zero percent discount rate. Net Present Value Project E Project H 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.) Net Present Value Project E Project H c. If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 12 percent? Project E Project H Both Hand E Appendix B Present value of $1, PVF PV = FV |(1+1) Percent Period 2% 4% 5% 6% 8% 9% 11% 1% 0.990 10% 0.909 0.980 0.943 0.926 0.917 0.901 1 2 3 0.962 0.925 0.889 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.842 0.772 0.980 0.971 0.961 0.951 0.826 0.751 0.961 0.942 0.924 0.906 12% 0.893 0.797 0.712 0.636 4 0.708 0.683 0.621 5 0.567 0.812 0.731 0.659 0.593 0.535 6 0.942 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.888 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.650 0.596 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.564 0.507 7 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 8 0.933 0.923 0.914 0.905 0.871 0.853 0.837 0.820 0.813 0.789 0.766 0.744 0.722 0.547 0.502 0.460 0.422 0.513 0.467 0.424 0.386 9 0.482 0.434 0.391 0.352 0.317 0.286 0.452 0.404 0.361 0.322 10 11 0.896 0.287 0.804 0.788 0.527 0.497 0.429 0.397 0.388 0.356 0.350 0.319 12 0.701 0.557 0.257 13 0.887 0.879 0.870 0.773 0.681 0.530 0.415 0.368 0.290 0.258 0.229 0.469 0.442 14 0.601 0.577 0.555 0.340 0.263 0.205 0.661 0.642 0.758 0.743 0.728 15 0.326 0.299 0.275 0.252 0.861 0.505 0.481 0.458 0.417 0.183 0.232 0.209 0.188 0.239 0.218 16 0.853 0.623 0.315 0.292 0.270 0.534 0.394 0.163 17 0.605 0.513 0.170 0.844 0.836 0.371 0.350 18 0.436 0.416 0.396 0.587 0.570 0.554 19 0.388 0.362 0.339 0.317 0.296 0.277 0.258 0.184 0.131 0.714 0.700 0.686 0.673 0.610 0.552 0.494 0.475 0.456 0.828 0.820 0.146 0.130 0.116 0.250 0.232 0.215 0.331 0.312 0.231 0.212 0.194 0.178 0.116 0.075 0.198 0.180 0.164 0.149 0.092 0.057 0.153 0.138 0.124 20 25 0.478 0.375 0.233 0.780 0.742 0.146 0.099 0.104 0.059 0.033 30 0.377 0.295 0.231 0.142 0.087 0.412 0.308 0.174 0.074 0.044 0.015 0.005 40 0.672 0.608 0.453 0.372 0.307 0.228 0.208 0.141 0.097 0.054 0.067 0.034 0.046 0.021 0.032 0.013 0.022 0.009 0.011 0.003 50 Appendix B (concluded) Present value of $1 Percent 14% 15% 16% 17% 18% 19% 20% 25% 35% 40% 50% Period 1 2 30% 0.769 0.870 0.855 0.877 0.769 0.675 0.731 13% 0.885 0.783 0.693 0.613 0.543 0.592 0.756 0.658 0.862 0.743 0.641 0.552 0.476 0.840 0.706 0.593 3 0.847 0.718 0.609 0.515 0.437 0.741 0.549 0.406 0.624 0.534 0.456 4 0.714 0.510 0.364 0.260 0.186 0.667 0.444 0.296 0.198 0.132 0.592 0.519 0.572 0.497 0.301 0.455 0.350 0.269 0.800 0.640 0.512 0.410 0.328 0.262 0.210 0.168 0.134 0.499 0.419 5 0.223 6 0.480 0.456 0.432 0.390 0.133 0.410 0.354 0.370 0.314 0.352 0.296 0.165 0.122 0.088 0.059 7 0.400 0.333 8 0.091 0.425 0.376 0.333 0.295 0.261 0.351 0.308 0.376 0.327 0.284 0.247 0.305 0.263 0.266 0.225 0.249 0.209 0.095 0.068 0.048 0.035 0.039 0.026 9 0.285 0.243 0.208 0.178 10 0.227 0.195 0.191 0.162 0.107 0.086 0.017 0.012 11 0.025 0.176 0.148 0.124 0.104 0.215 0.187 0.163 12 0.069 0.055 0.231 0.204 0.181 0.160 0.018 0.013 13 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 0.010 0.004 0.001 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 14 0.168 0.145 0.125 0.108 0.093 0.080 0.207 0.159 0.123 0.094 0.073 0.056 0.043 0.033 0.025 0.020 0.015 0.012 0.009 0.007 0.005 0.137 0.116 0.099 0.084 0.071 0.060 0.141 0.123 0.107 0.093 15 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043 0.020 0.009 0.008 0.005 0.003 0.002 0.002 0.001 0.009 0.006 0.005 0.003 0.067 0.050 0.037 0.027 0.020 0.015 0.011 0.008 0.006 0.005 0.003 0.002 0.001 16 0.141 17 0.125 18 0.111 0.098 0.087 0.001 0.088 0.074 0.062 0.052 0.044 0.037 0.031 0.013 0.005 0.081 0.070 0.061 0.069 0.060 0.044 0.035 0.028 0.023 0.018 0.014 0.012 0.004 0.001 19 0.002 0.002 0.001 0 20 0.051 0.043 0.037 0.016 0.007 0.001 0 25 0.047 0.001 0 0 30 0.026 0.051 0.024 0.012 0.003 0.001 0 0 0.038 0.020 0.005 0.001 0 0.030 0.015 0.004 0.001 40 0.008 0.001 0 0 0 0 0.002 0 50 0.002 0 0 0 0 0 0 0