Chapter 26

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: Present Value of an Annuity of $1 at Compound Interest The wind turbines require an investment of $942,150, while the biofuel equipment requires an investment of $1,791,830. No residual value is expected from either project. Required: 1a. Compute the net 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 indicate a negative net present value. If required, round to the nearest whole dollar. 1b. Compute a present value index for each project. If required, round your answers to two decimal places. 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 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