Question: Question 7 (6 points) Maxima Construction is considering 2 long-term capital investment projects. Each investment has a useful life of 5 years. Relevant data for
Question 7 (6 points) Maxima Construction is considering 2 long-term capital investment projects. Each investment has a useful life of 5 years. Relevant data for each project follows: Capital Investment Annual Profit Project A $ 140,000 $ 13,000 Project B $ 160,000 $ 15,500 Additional Information: Depreciation is calculated by the straight-line method with no residual (salvage) value. The company's cost of capital rate is 8%. Refer to the excerpts of the Present Value Tables provided below. Required: 1. Compute the net present value for each project. (Round to nearest dollar) (2 marks per project, 4 marks total) 2. Which Project would you recommend and why? (2 marks)
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