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 lives, but each requires an investment of $$738,000.$ The estimated net cash flows from each project are as follows:The committee has selected a rate of $15\%$ 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 expansions

residual value would be $$258,000.$

Present Value of $$1$ at Compound Interest

Present Value of an Annuity of $$1$ at Compound Interest

Required:

If required, use the minus sign to indicate a negative net present value.

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 the nearest dollar.