apter 26 Complex Homework eBook Printer Net Present Value Method, Internal Rate of Return Method, and Analysis The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Wind Turbines Biofuel Equipment $200,000 $380,000 2 200,000 330,000 3 200,000 380,000 1 4. 200,000 380,000 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 4.865 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 6 7 4.368 4.160 B 3.837 9 10 4.917 4.355 4.11: 3.784 3.326 5.582 4.564 3.605 6.210 5.335 4.968 4.457 6.802 5.759 5.320 4.772 4.035 7.360 6.145 5.650 5.019 4.192 The wind turbines require an investment of 5517,800, while the botuel equipment requires an investment of $1,004,000. No residual value is expected from etter project Required: 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of 51 In the table above. If required, use the minus sign to Indicate negative net present value. If required, round to the nearest whole dollar Wind Turbines Biofuel Equipment Present value of annual net cash flows 1,660,400 X 3,154,760 X Less amount to be invested 517,800 1,084,900 Net present value 1,142,600 X 2,060,860 X 1b. Compute a present value index for each project. If required, round your answers to two decimal places ta. Compute the not present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicates negative not present value. If required, round to the nearest whole dollar, Wind Turbines Biofuel Equipment Present value of annual net cash flow 1,660,400 x 3,154,700 X Loss amount to be invested 517,800 1,084,900 Net present value 1,142,600 x 2,069,860 X 11. Computea present value index for each project. If required, round your answers to two decimal places Present Value Index Wind Turbines 1.45 X Biofuel Equipment 1.52 X 2. Determine the internal rate of return for each project by (a) computing a present value factor for an anculty of St and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines Biofuel Equipment Present value factor for an annuity of Intemal rate of return w X is a better financial opportunity compared to the 3. The not present value present value index, and internal rate of return all indicate that the wind turbines biofuel equipment X, although both investments meet the minimum return criterion of 10 Type here to search BE . 33F Clear
