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
($40,000 Investment)					($36,000 Investment)
Year	Cash Flow				Year	Cash Flow
1	$	9,000			1	$	17,000
2		14,000			2		15,000
3		20,000			3		13,000
4		22,000

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

c. If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 11 percent?

• Project E

• Project H

• Both H and E

1 PV= FV Present value of $1, PV,F Appendix B (1+i Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 0.952 1 0.990 0.980 0.971 0.962 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.812 2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.797 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.888 4 0.961 0.924 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.906 0.747 0.621 0.951 0.863 0.822 0.784 0.713 0.681 0.650 0.593 0.567 0.705 6 0.942 0.888 0.837 0.790 0.746 0.666 0.630 0.596 0.564 0.535 0.507 0.760 0.711 0.547 0.513 7 0.933 0.871 0.813 0.665 0.623 0.583 0.482 0.452 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.837 0.766 0.703 0.645 0.544 0.460 0.39 0.914 0.592 0.500 0.424 0.36 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.497 12 0.887 0.788 0.701 0.625 0.557 0.444 0.397 0.356 0.319 0.286 0.257 0.469 13 0.879 0.773 0.681 0.601 0.530 0.415 0.368 0.326 0.290 0.258 0.229 0.340 0.661 0.505 0.388 0.299 0.205 14 0.870 0.758 0.577 0.442 0.263 0.232 0.48 0.743 0.239 15 0.861 0.642 0.555 0.417 0.362 0.315 0.275 0.209 0.183 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.436 0.371 0.270 0.231 17 0.844 0.714 0.605 0.513 0.317 0.198 0.170 0.146 O.180 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.153 0.130 0.331 0.164 19 0.828 0.686 0.570 0.475 0.396 0.277 0.232 0.194 0.138 O.116 0.377 0.312 0.258 0.178 O.149 20 0.820 0.673 0.554 0.456 0.215 O.124 0.104 0.610 0.295 25 0.780 0.478 0.375 0.233 0.184 0.146 0.116 O.092 0.074 0.059 0.099 30 0.552 0.174 0.742 0.412 0.308 0.231 0.131 0.075 0.057 0.044 0.033 0.067 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.032 0.022 0.015 0.011 0.228 50 0.608 0.372 0.141 0.087 0.054 0.034 0.021 0.013 0.009 0.005 0.003 Present value of $1 Appendix B (concluded) Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 0.862 0.833 1 0.885 0.877 0.870 0.855 0.847 0.840 0.800 0.769 0.741 0.714 0.667 0.756 0.731 0.718 0.706 0.640 2 0.783 0.769 0.743 0.694 0.592 0.549 0.510 0.444 3 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.512 0.455 0.406 0.364 0.296 0.592 4 0.613 0.572 0.552 0.534 0.515 0.499 0.482 0.410 0.350 0.301 0.260 0.198 0.519 0.543 0.497 0.476 0.456 0.437 0.419 0.402 0.328 0.269 0.223 0.186 0.132 6 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.262 0.207 0.165 0.133 0.088 0.279 0.059 0.400 0.376 0.296 0.210 0.159 7 0.425 0.354 0.333 0.314 0.122 0.095 0.35 0.249 8 0.376 0.327 0.305 0.285 0.266 0.233 0.168 0.123 0.091 0.068 0.039 0.243 0.333 0.225 0.209 0.194 0.067 9 0.308 0.284 0.263 0.134 O.094 0.048 0.026 0.270 0.017 10 0.295 0.247 0.227 0.208 0.191 0.176 0.162 0.107 0.073 0.050 0.035 0.012 11 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 O.086 0.056 0.037 0.025 12 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.069 0.043 0.027 0.018 0.008 0.182 0.116 13 0.204 0.163 0.145 0.130 0.104 0.093 0.055 0.033 0.020 0.013 0.005 0.078 0.125 0.044 0.015 14 0.181 0.160 0.14 0.111 0.099 0.088 O.025 0.009 0.003 15 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.035 0.020 0.011 0.006 0.002 0.107 0.071 0.002 16 0.141 0.123 0.093 0.081 0.062 0.054 O.028 0.015 0.008 0.005 0.108 17 0.125 0.093 0.080 0.069 0.060 0.052 0.045 0.023 0.012 0.006 0.003 0.001 0.095 0.08 0.044 0.009 18 0.111 0.069 0.059 0.051 0.038 0.018 0.005 0.002 0.001 0.070 0.037 0.007 0.003 0.002 19 0.098 0.083 0.060 0.051 0.043 0.031 0.014 0.037 20 0.087 0.073 0.061 0.05 0.043 0.031 0.026 0.012 0.005 0.002 0.001 0.020 0.010 0.001 25 0.047 0.038 0.030 0.024 0.016 0.013 0.004 0.001 0 0.020 0.015 0.009 0.004 30 0.026 0.012 0.007 0.005 0.001 0 40 0.008 O.005 0.004 0.003 0.002 0.001 0.001 O.001 0.001 50 0.002 0.001 0.001 O . O O c O O O