The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:

Year Radio Station TV Station 1 $220,000 $440,000 2 220,000 440,000 3 220,000 440,000 4 220,000 440,000

Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192

The radio station requires an investment of $569,580, while the TV station requires an investment of $1,256,200. No residual value is expected from either project.

Required:

1a. Compute the net present value for each project. Use a rate of 10% and the The sum of the present values of a series of equal cash flows to be received at fixed intervals.present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar.

Radio Station TV Station Present value of annual net cash flows $ $ Less amount to be invested $ $ Net present value $ $

1b. Compute a An index computed by dividing the total present value of the net cash flow to be received from a proposed capital investment by the amount to be invested.present value index for each project. If required, round your answers to two decimal places.

Present Value Index Radio Station ? TV Station ?

2. Determine the internal rate of return for each project by (a) computing a present value factor for an A series of equal cash flows at fixed intervals.annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent.

Radio Station TV Station Present value factor for an annuity of $1 ? ? Internal rate of return % %

3. The net present value, present value index, and internal rate of return all indicate that the radio station or tv station is a better financial opportunity compared to the radio station or tv station, although both investments meet the minimum return criterion of 10%.