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
($30,000 investment)				($28,000 investment)
Year	Cash flow			Year	Cash flow
1		$ 8,000		1		$ 17,000
2		11,000		2		12,000
3		12,000		3		10,000
4		15,000

(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	$