Question: Problem 12-23 Net present value profile [LO4] Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H
Problem 12-23 Net present value profile [LO4]
| 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: Calculate your final answer using the formula and financial calculator methods. |
| Project E |
| Project H | ||||
| ($25,000 investment) |
| ($27,000 investment) | ||||
| Year | Cash Flow |
| Year | Cash Flow | ||
| 1 |
| $ 6,000 |
| 1 |
| $ 18,000 |
| 2 |
| 9,000 |
| 2 |
| 9,000 |
| 3 |
| 10,000 |
| 3 |
| 7,000 |
| 4 |
| 13,000 |
|
|
|
|
| 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 9 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.) |
|
| Net Present Value |
| Project E | $ |
| Project H | $ |
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