Question

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: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.

Project E | Project H | |||||||

($41,000 Investment) | ($42,000 Investment) | |||||||

Year | Cash Flow | Year | Cash Flow | |||||

1 | $ | 11,000 | 1 | $ | 23,000 | |||

2 | 16,000 | 2 | 17,000 | |||||

3 | 22,000 | 3 | 15,000 | |||||

4 | 24,000 | |||||||

**a.** Determine the net present value of the projects
based on a zero percent discount rate.

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.)
**

Project E _________

Project H ________

Answer #1

**a.**

**E:**

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=11000+16000+22000+24000

=$73000

NPV=Present value of inflows-Present value of outflows

=$73000-$41000

**=$32000**

**H:**

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=23000+17000+15000

=$55000

NPV=Present value of inflows-Present value of outflows

=$55000-$42000

**=$13000**

**b.**

**E:**

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=11000/1.09+16000/1.09^2+22000/1.09^3+24000/1.09^4

=$57548.86

NPV=Present value of inflows-Present value of outflows

=$57548.86-$41000

**=$16548.86(Approx).**

**H:**

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=23000/1.09+17000/1.09^2+15000/1.09^3

=$46992.23

NPV=Present value of inflows-Present value of outflows

=$46992.23-$42000

**=$4992.23(Approx).**

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: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E
Project H
($46,000 Investment)
($45,000 Investment)
Year
Cash Flow
Year
Cash Flow...

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: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E
Project H
($22,000 Investment)
($21,000 Investment)
Year
Cash Flow
Year
Cash Flow...

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: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods. Project E Project H
($35,000 Investment) ($37,000 Investment) Year Cash Flow Year Cash
Flow...

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: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E Project H
($35,000 investment) ($37,000 investment)
Year Cash Flow Year Cash Flow...

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: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E
Project H
($49,000 Investment)
($46,000 Investment)
Year
Cash Flow
Year
Cash Flow...

Davis Chili Company is considering an investment of $37,000,
which produces the following inflows:
Year
Cash Flow
1
$
17,000
2
16,000
3
13,000
Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.
a.
Determine the net present value of the project based on a zero
percent discount rate.
Net present
value
$
b.
Determine the net present value of the project based on a 10
percent...

X-treme Vitamin Company is considering two investments, both of
which cost $42,000. The cash flows are as follows:
Year
Project A
Project B
1
$
44,000
$
42,000
2
15,000
14,000
3
15,000
20,000
Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.
a-1. Calculate the payback period for Project A
and Project B. (Round your answers to 2 decimal
places.)
a-2. Which of the two projects should be...

Davis Chili Company is
considering an investment of $65,000, which produces the following
inflows:
Year
Cash Flow
1
$
29,000
2
28,000
3
25,000
Use Appendix B for an
approximate answer but calculate your final answer using the
formula and financial calculator methods.
a. Determine the net present value of the project
based on a zero percent discount rate.
b.
Determine the net present value of the project based on a 11
percent discount rate. (Do not round intermediate
calculations...

X-treme Vitamin Company is considering two investments, both of
which cost $47,000. The cash flows are as follows:
Year
Project A
Project B
1
$
50,000
$
47,000
2
20,000
19,000
3
18,000
25,000
Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.
a-1. Calculate the payback period for Project A
and Project B. (Round your answers to 2 decimal
places.)
a-2. Which of the two projects should be...

A project has an initial investment in equipment of $310,000
and in net working capital of $62,000. The equipment will be
depreciated over the 3-year life of the project to a salvage value
of $155,000. All of the net working capital will be recouped at
the end of the project. The annual operating cash flow is $345,000
and the discount rate is 25 percent. What is the project's net
present value if the tax rate is 34 percent?
A. $380,800.00...

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