Project 1 requires an original investment of $70,300. The project will yield cash flows of $10,000...

Transcribed Image Text:

Project 1 requires an original investment of $70,300. The project will yield cash flows of $10,000 per year for 10 years. Project 2 has a computed net present value of $13,700 over a eight-year life. Project 1 could be sold at the end of eight years for a price of $36,000. Net Present Value-Unequal Lives 1. PE 26.01.ALGO 2. PE 26.02.ALGO 3. PE 26.03.ALGO 4. PE 26.04.ALGO Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. 5. PE 26.05. ALGO Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.1621 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% I 0.943 0.909 0.893 0.870 0.833 8 0.627 0.467 0.404 0.327 0.233 1. PE 26.01 ALGO 9 0.592 0.424 0.361 0.284 0.194 2. PE 26.02 ALGO 10 0.558 0.386 0.322 0.247 0.162 3. PE 26.03 ALGO Present Value of an Annuity of $1 at Compound Interest 4. PE 26.04.ALGO Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 5. PE 26.05 ALGO 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 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 7 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 10 7.360 6.145 5.650 5.019 4.192 b. Which project provides the greatest net present value? a. Determine the net present value of Project 1 over a eight-year life, with residual value, assuming a minimum rate of return of 6%. If required, round to the nearest dollar. E Project 1 requires an original investment of $70,300. The project will yield cash flows of $10,000 per year for 10 years. Project 2 has a computed net present value of $13,700 over a eight-year life. Project 1 could be sold at the end of eight years for a price of $36,000. Net Present Value-Unequal Lives 1. PE 26.01.ALGO 2. PE 26.02.ALGO 3. PE 26.03.ALGO 4. PE 26.04.ALGO Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. 5. PE 26.05. ALGO Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.1621 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% I 0.943 0.909 0.893 0.870 0.833 8 0.627 0.467 0.404 0.327 0.233 1. PE 26.01 ALGO 9 0.592 0.424 0.361 0.284 0.194 2. PE 26.02 ALGO 10 0.558 0.386 0.322 0.247 0.162 3. PE 26.03 ALGO Present Value of an Annuity of $1 at Compound Interest 4. PE 26.04.ALGO Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 5. PE 26.05 ALGO 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 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 7 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 10 7.360 6.145 5.650 5.019 4.192 b. Which project provides the greatest net present value? a. Determine the net present value of Project 1 over a eight-year life, with residual value, assuming a minimum rate of return of 6%. If required, round to the nearest dollar. E