1 Back Painter The investment comittee of Sentry tresurance Co, is evaluating the projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $430,000. The estimated net cash flows from each project are as follows: Met Cash Flows Year Office Expansion Servers $125,000 $165.000 2 125,000 165,000 3 125.000 165.000 4 125.000 165,000 125.000 6 125.000 The committee has selected a rate of 12 for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful te is $0, but at the end of the fourth year the office expansio's residual value would be $180,000. Present Value of $1 at Compound Interest Year 104 15 209 1 0.943 0.909 0.893 0.87 0.833 0.89 0.826 0.797 0.756 3 0.940 0.712 0.650 0.579 4 0.790 0.583 0.630 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 Fo.315 7 0.665 0.513 0.450 0.376 0.279 0.627 0.44 0.127 0.233 9 0.592 0.424 0.361 0.284 0.14 10 0.550 0.336 0.322 0.162 5 Med 11:03 AM 30/2020 (hp Present Value of an Annuity of $1 at Compound Interest Year 69% 10% 1296 15W 20 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.106 2.283 2.855 4 3.465 3.170 3.037 2.589 5 4.212 3.791 3.353 2.991 3.605 4.111 6 4.917 4.355 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 Required: 1. For each project compute the net present value. Use the present value of an annuity of $1 table above. Ignore the unequal lives of the projects. If required, round to th Office Expansio Server Upgrade Present value of annual net cash flows $513,875 $ 501,105 Less amount to be invested 490,000 490,000 Net present value 23,8757 11,105 more Check My Work uses remaining All work saved 7 5.582 4.85 4.564 3.605 5.235 4,487 3.837 6.210 6.802 9 5.759 5.128 4.772 4.001 10 7.360 6.145 5.019 4.122 Required 1. For each project, compute the net present val. Use the present value of an annuity of $1 table above. I wore the equal lives of the projects. Frequired, round to the nearest dolla. Office Expansion Serve Upgrade Present value of annual cash flows $ 512,75 501,105 Les amount to be invested 400,000 490,000 Net present value 23,875 11,105 2. For each project compute the net present value assuming that the office expansion is adjusted to a four year Wife for purposes of analysis. Use the present value of $1 table above office Expansion Server Upgrade Present walue of net cash flow total $404,055.7 X 501,154,5 x Less amount to be invested 40.200 490,000 Net present value 4,105X 11,105 3. The net present value of the two projects over qual lives indicates that the server uporade has a higher et rent value and would be a superior investment