Question

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment....

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
1 $ 6,000 1 $ 15,000
2 7,000 2 6,000
3 8,000 3 5,000
4 11,000


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



b. Determine the net present value of the projects based on a discount rate of 10 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.)



c. If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 10 percent?

  • Project E

  • Project H

  • Both H and E

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