Question
Problem 12-23 Net present value profile [LO4] Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H
Problem 12-23 Net present value profile [LO4]
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: Calculate your final answer using the formula and financial calculator methods. |
Project E |
| Project H | ||||
($25,000 investment) |
| ($27,000 investment) | ||||
Year | Cash Flow |
| Year | Cash Flow | ||
1 |
| $ 6,000 |
| 1 |
| $ 18,000 |
2 |
| 9,000 |
| 2 |
| 9,000 |
3 |
| 10,000 |
| 3 |
| 7,000 |
4 |
| 13,000 |
|
|
|
|
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 9 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.) |
| Net Present Value |
Project E | $ |
Project H | $ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started