Question
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: UseAppendix Bfor an approximate answer but calculate your final answer using the formula and financial calculator methods.
Project EProject H($46,000 Investment)($45,000 Investment)YearCash FlowYearCash Flow1$9,0001$24,000213,000218,000323,000314,000430,000
a.Determine the net present value of the projects based on a zero percent discount rate.
Project E -
Project H -
b.Determine the net present value of the projects based on a discount rate of 12 percent.(Do not round intermediate calculations and round your answers to 2 decimal places.)
Project E -
Project H -
c.If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 12 percent?
- Project E
- Project H
- Both H and E
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