The management of Mid South Utilities Inc. is considering two capital investment projects. The estimated net cash

Question:

The management of Mid South Utilities Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:

The generating unit requires an investment of $1,761,460, while the distribution network expansion requires an investment of $665,700. No residual value is expected from either project.Instructions1. Compute the following for each project:a. The net present value. Use a rate of 6% and the present value of an annuity of $1 table appearing in this chapter.b. A present value index. Round to two decimal places.2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 table appearing in this chapter.3. What advantage does the internal rate of return method have over the net present value method in comparingprojects?

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