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Keller Construction is considering two new investments. Project E calls for the purchase of earth-moving equipment. Project H represents the investment in a hydraulic lift.
Keller Construction is considering two new investments. Project E calls for the purchase of earth-moving equipment. Project H represents the investment in a hydraulic lift. Keller wishes to use a NPV profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B. Project E ($37,000 Project H ($35,000 investment) investment) Year 1 2 3 4 Cash Flow $9,000 12,000 18,000 20,000 Year 1 2 3 Cash Flow $17,000 18,000 17,000 a. Determine the NPV of the projects based on a zero discount rate. NPV $ Project E Project 1 $ b. Determine the NPV of the projects based on a 9 percent discount rate. (Round "PV Factors" to 3 decimal places. Round the final answers to the nearest whole dollar.) NPV Project E Projects c. Not available in Connect d. If the two projects are not mutually exclusive, what would your acceptance or rejection decision be if the cost of capital (discount rate) is 10 percent? (Use the NPV profile for your decision; no actual numbers are necessary.) Project E Project H Both Hand E e. If the two projects are mutually exclusive (the selection of one precludes the selection of the other), what would be your decision if the cost of capital is (1) 6 percent, (2) 13 percent, (3) 24 percent? Use the NPV profile for your answer. 6% cost of capital Click to select) 13% cost of capital (Click to select) 24% cost of capital (Click to select)
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