The management of FICSIT Inc. is considering two capital investment projects. The estimated net

cash flows from each project are as follows:

The wind turbines require an investment of $$877,600,$ while the biofuel equipment requires an

investment of $$910,000.$ No residual value is expected from either project.

Problem $2$ Instructions

a$.$ Compute the following for each project:

i$.$ The net present value. Use a rate of $6\%$ and the present value of an annuity of

$$1$ table appearing in this chapter $($Exhibit $5).$

ii$.$ A present value index. $($Round to two decimal places.$)$

b$.$ Determine the internal rate of return for each project by:

i$.$ computing a present value factor for an annuity of $$1$ and

ii$.$ using the present value of an annuity of $$1$ table appearing in this chapter

$($Exhibit $5).$

c$.$ What advantage does the internal rate of return method have over the net present

value method in comparing projects?$2.$ The management of FICSIT Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: