eBook Print Item Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service C The management of Advanced Alternative Power Inc. is considering two capital investme Biofuel Wind Year Turbines Equipment 1 $350,000 $670,000 2 350,000 670,000 3 350,000 670,000 4 350,000 670,000 The wind turbines require an investment of $999,250, while the biofuel equipment requires project. 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 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 Check My Work 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 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. I Present value of net cash flow total Less amount to be invested i Net present value Office Expansion Server Upgrade 3. The net present value of the two projects over equal lives indicates that the server upgrade has a higher net present value and would be a superior Investment. Check My Work Previous Next> Email instructor Save and Ext Submit Assignment for Grading Present Value of $1 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 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.554 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 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 S 4.212 3.791 3.605 3.353 2.991 Check My Work 3,626 All work saved. W A Print Bem 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 $490,000. The estimated net cash flows from each project are as follows: Net Cash Flows Year Office Expansion Servers $125,000 $165,000 2 125,000 165,000 3 125,000 4 125,000 165,000 165,000 5 6 125,000 125,000 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 50, 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 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0,452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 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 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10. 7.360 6.145 5.650 5.019 4.192 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 Previous Next 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 the nearest dollar. Present value of annual net cash flows Less amount to be invested Net present value Office Expansion Server Upgrade 513,875 501,105. 490,000 23,875 490,000 11,105 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 c $1 table above. Present value of net cash flow total Less amount to be invested Net present value Office Expansion Server Upgrade -494,105 X 501,163 490,000 490,000 4,105 X 4,105 X 3. The net present value of the two projects over equal lives indicates that the server upgrade investment. V has a higher net present value and would be a superior Check My Work Previous Nex