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Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift.

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project E Project H
($50,000 investment) ($42,000 investment)
Year Cash Flow Year Cash Flow
1 $ 14,000 1 $ 23,000
2 17,000 2 17,000
3 22,000 3 13,000
4 29,000
a.

Determine the net present value of the projects based on a zero percent discount rate

Net Present Value
Project E $
Project H $
b.

Determine the net present value of the projects based on a discount rate of 13 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.

Net Present Value
Project E $
Project H $
c.

If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 13 percent?

Project E
Project H
Both H and E

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