Alternative capital investments The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful live but each requires an investment of $490,000. The estimated net cash flows from each project are as follows: Net Cash Net Cash Flows Flows Office Year Servers Expansion $125,000 $165,000 125,000 165,000 W N *125,000 165,000 4 125,000 165,000 125,000 6 125,000 The committee has selected a rate of 120%for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $180,000. 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 UT 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 79