Net Present Value Method, Internal Rate of Return Method, and Analysis 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 Wind Turbines Biofuel Equipment 1 2 3 4 1 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 2 3 4 5 6 7 8 9 $340,000 340,000 340,000 340,000 10 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 0.909 1.736 2.487 3.170 3.791 4.355 $650,000 650,000 650,000 650,000 4.868 5.335 5.759 6.145 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 Next

The wind turbines require an investment of $970,700, while the biofuel equipment requires an investment of $1,682,850. No residual value is expected from eilther project. Required: 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an aneiuty of $1 in the table above. if required, use the minus slon to indicate o negative net present value. If required, round to the nearest whole dollar. 1b. Compute a bresent value index for eoch project. If required, round your answers to two decimat places. Net Present Value Method, Internal Rate of Return Method, and Analysis: The management of Advanced Aftemative Power Inc is considering twa capital investment projects. The estimated net cash fiows from each project are as folows: Present Value of an Annuity of $1 at Compound Interest 2. Determine the internal rate of return for each project by (a) computing a present value factor for an anruty of st and (b) ueling the present value of an annuity of si in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the neartet whole percent. 3. The net present value, present value index, and internat rate of return al indicate that the is a becter financial opportuntr comparte to the , although both investments met the minimum return ortenon of 10%