1. Net Present ValueUnequal Lives

Project 1 requires an original investment of $71,500. The project will yield cash flows of $19,000 per year for nine years. Project 2 has a calculated net present value of $20,000 over a seven-year life. Project 1 could be sold at the end of seven years for a price of $79,000.

Use thePresent Value of $1 at Compound Interestand thePresent Value of an Annuityof $1 at Compound Interesttables shown below.

a.Determine the net present value of Project 1 over a seven-year life with residual value, assuming a minimum rate of return of 20%. If required, round to the nearest dollar.