A project has estimated annual net cash flows of $77,000 for eight years and is estimated to cost $277,734. Assume a minimum acceptable rate of return of 20%. Use the Present Value of an Annuity of $1 at Compound Interest table below.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	1.833	1.736	1.690	1.626	1.528
3	2.673	2.487	2.402	2.283	2.106
4	3.465	3.170	3.037	2.855	2.589
5	4.212	3.791	3.605	3.352	2.991
6	4.917	4.355	4.111	3.784	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

Determine (1) the net present value of the project (if required, round to the nearest dollar) and (2) the present value index (rounded to two decimal places). If required, use the minus sign to indicate a negative net present value.

(1) Net present value of the project

$

(2) Present value index

Internal Rate of Return

A project is estimated to cost $411,558 and provide annual net cash flows of $82,000 for 10 years.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	1.833	1.736	1.690	1.626	1.528
3	2.673	2.487	2.402	2.283	2.106
4	3.465	3.170	3.037	2.855	2.589
5	4.212	3.791	3.605	3.352	2.991
6	4.917	4.355	4.111	3.784	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

Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above.
%

Net Present Value—Unequal Lives

Project 1 requires an original investment of $97,600. The project will yield cash flows of $18,000 per year for nine years. Project 2 has a calculated net present value of $31,600 over a seven-year life. Project 1 could be sold at the end of seven years for a price of $73,000.

Use the Present Value of $1 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	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	0.890	0.826	0.797	0.756	0.694
3	0.840	0.751	0.712	0.658	0.579
4	0.792	0.683	0.636	0.572	0.482
5	0.747	0.621	0.567	0.497	0.402
6	0.705	0.564	0.507	0.432	0.335
7	0.665	0.513	0.452	0.376	0.279
8	0.627	0.467	0.404	0.327	0.233
9	0.592	0.424	0.361	0.284	0.194
10	0.558	0.386	0.322	0.247	0.162

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	1.833	1.736	1.690	1.626	1.528
3	2.673	2.487	2.402	2.283	2.106
4	3.465	3.170	3.037	2.855	2.589
5	4.212	3.791	3.605	3.352	2.991
6	4.917	4.355	4.111	3.784	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

a. Determine the net present value of Project 1 over a seven-year life with residual value, assuming a minimum rate of return of 10%. If required, round to the nearest dollar.
$

b. Which project provides the greatest net present value?
SelectProject 1Project 2

Master Fab Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $115,000 with a $10,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $20,445 per year. In addition, the equipment will have operating and energy costs of $5,570 per year.

Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.
%

Pocket Pilot Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications device. The device is expected to generate additional annual sales of 7,000 units at $172.00 per unit. The equipment has a cost of $716,100, residual value of $53,900, and an eight-year life. The equipment can only be used to manufacture the device. The cost to manufacture the device is shown below.

Cost per unit:
	Direct labor		$29.00
	Direct materials		113.00
	Factory overhead (including depreciation)		19.55
		Total cost per unit	$161.55

Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
%