Alternative Capital Investments The investment different useful lives, but each requires an investment of $490,000. The estimated net cash flows from each project are as follows: t committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have Net Cash Flows Year Office Expansion Servers $165,000 165,000 165,000 165,000 $125,000 125,000 125,000 125,000 125,000 125,000 The committee has selected a rate of 12% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is so; 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 0.9434 0.9091 0.8929 0.8696 0.8333 2 0.8900 0.8265 0.7972 0.7561 0.6944 3 0.8396 0.7513 0.7118 0.6575 0.5787 4 0.7921 0.6830 0.6355 0.57180.4823 5 0.7473 0.6209 0.5674 0,4972 0.4019 6 0.7050 0.5645 0.5066 0.4323 0.3349 7 0.6651 0.5132 0.4523 0.3759 0.2791 8 0.6274 0.4665 0.4039 0.3269 0.2326 9 0.5919 0.4241 0.3606 0.2843 0.1938 10 0.5584 0.3855 0.3220 0.2472 0.1615 Present Value of an Annuity of $1 at Compound Interest Present Value of an Annuity of $1 at Compound Interest Year 690 10% 12% 15% 20% 1 0.9434 0.9091 0.8929 0.8696 0.8333 2 1.8334 1.7355 1.6901 1.62571.5278 3 2.6730 2.4868 2.4018 2.2832 2.1065 4 3.4651 3.1699 3.0374 2.8550 2.5887 5 4.2124 3.7908 3.6048 3.3522 2.9906 6 4.9173 4.3553 4.1114 3.7845 3.3255 7 5.5824 4.8684 4.5638 4.1604 3.6046 8 6.2098 5.3349 4.9676 4.4873 3.8372 9 6.8017 5.7590 5.3283 4.7716 4.0301 10 7.3601 6.1446 5.6502 5.0188 4.1923 Required 1. 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 Office Expansion Server Upgrade 501,163X 490,000 V 11,163 X 513,925 490,000 23,925 Present value of annual net cash flows Less amount to be invested Net present value 2. For each project, compute the net present value, assuming that the office expansion is adjusted to a four-year life for purposes of analysis. Use the present value of $1 table above. Office Expansion Server Upgrade Present value of net cash flow total 494,062x 501,164x 490,000 V 490,000 Less amount to be invested 4,061 X Net present value