52)

2 Net Present Value-Unequal Lives Project 1 requires an original investment of $40,200. The project will yield cash flows of $10,000 per year for seven years. Project 2 has a calculated net present value of $5,000 over a five-year e Project I could be sold at the end of five years for a price of $49,000. Use the Present Value of S1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 109 12% 15% 20% 1 0.909 0.893 0.370 0.833 0.590 0.125 0,797 0.756 0.694 0.540 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 0.621 0.567 0.497 0.402 0.705 0.564 0507 0.432 0.335 7 0.565 0.513 0.452 0.376 0.279 0.4154 0.327 0.233 0.592 0.424 0.361 0.24 0.194 0356 0.322 0.247 0.162 5 0.741 6 Present Value of an Annuity of 51 at Compound Interest Year 6 109 129 20% 0.94 0.870 0.833 1.600 1.626 1.528 2 2.250 2.105 3.170 1032 2 555 2.59 1 10 2.91 Present Value of an Annuity of $1 at Compound Interest Year 64 104 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.735 1.690 1.626 1.528 2.573 2.482 2.402 2.283 2.106 4 3.465 3.170 3.037 2.85S 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.912 4.111 3.784 3.326 2 5.582 4.668 4.564 4.160 3.605 5 6.210 5.335 4.969 4.487 3.837 9 6302 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.010 2. Determine the net present value of Project 1 over a five-year life with residual valot, assuming a minimum rate of retum of 20% required, mund ta the nearest dollar b. Which project provides the greatest net present value