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8) Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic

8)

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: UseAppendix Bfor an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project E Project H
($19,000 investment) ($19,000 investment)
Year Cash Flow Year Cash Flow
1 $ 4,000 1 $ 15,000
2 5,000 2 4,000
3 6,000 3 3,000
4 13,000

a.

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

Net Present Value
Project E $
Project H $

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.)

Net Present Value
Project E $
Project H $

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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