Question
Problem 12-23 Net present value profile [LO4] Keller Construction is considering two new investments. Project E calls for the purchase of earth moving equipment. Project
Problem 12-23 Net present value profile [LO4]
Keller Construction is considering two new investments. Project E calls for the purchase of earth moving 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.
| Project E | Project H | |||||
| ($54,000 investment) | ($48,000 investment) | |||||
| Year | Cash flow | Year | Cash flow | |||
| 1 | $ 12,000 | 1 | $ 24,000 | |||
| 2 | 16,000 | 2 | 17,000 | |||
| 3 | 26,000 | 3 | 18,000 | |||
| 4 | 33,000 | |||||
| (A) Determine the net present value of the projects based on a zero discount rate. (Omit the "$" sign in your response.) |
| Net present value | |
| Project E | $ __?__ |
| Project H | $ __?__ |
|
| (B) Determine the net present value of the projects based on a 11 percent discount rate. (Round "PV Factors" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) |
| Net present value | |
| Project E | $ __?__ |
| Project H | $ __?__ |
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Behavioral Finance And Wealth Management
Authors: Michael M. Pompian
2nd Edition
1118014324, 978-1118014325
