Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc is considering two capital investment projects. The estimated net cash flows from each project are as follows: Wind Biofuel Year Turbines Equipment $270,000 $540,000 270,000 540,000 270,000 540,000 1 2 3 4 270,000 540,000 1.528 The wind turbines require an investment of $699,030, while the biofuel equipment requires an investment of $1,541,700. No residual value is expected from either project Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 3 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 2 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 TAE CEED EO TA 4 Previous Next Submit Test for Grading All work saved. 6.145 9 6.802 5.759 5.328 4.772 4.031 10 7.360 5.650 5.019 4.192 Required: la compute the net present value for each project. Use a rate of 10% and the present value of an annuity of S1 in the table above. If required, ie the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar Wind Turbines Biofuel Equipment Present value of annual net cash flows Less amount to be invested Net present value 16. Compute a present valoe Index for each project. If required, round your answers to two decimal places Present Value Index Wind Turbines Biofuel Equipment 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annulty of S1 and (b) using the present value of an annuity or $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 perett. Wind Turbines Biofuel Equipment Present value factor for an annuity of $1 Internal rate of retur 3. The net present Value, present value index, and internal rate of return all indicate that the ware a better financial opportunity compared to the although both investments meet the minimum retum criterion of 10 Previous Next >