Use the NPV method to determine whether McKnight Products should invest in the following projects: Project A: Costs $290,000 and offers eight annual net cash inflows of $56,000. McKnight Products requires an annual return of 14% on investments of this nature. Project B: Costs $380,000 and offers 9 annual net cash inflows of $76,000. McKnight Products demands an annual return of 12% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Years 1-8 Present value of annuity 0 Investment Net present value of Project A Calculate the NPV of Project B. Project B: Years 1-9 0 Present value of annuity Investment Net Cash Inflow Annuity PV Factor (i=14%, n=8) Present Value Net Cash Inflow Annuity PV Factor (i=12%, n=9) Present Value Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Project A Project B Maximum Acceptable Price Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Project A Project B = = Profitability Index Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% Period 1 0.990 0.980 0.971 0.962 Period 2 1.970 1.942 1.913 1.886 Period 3 2.941 2.884 2.829 2.775 Period 4 3.902 3.808 Period 5 4.853 4.713 4.580 3.717 3.630 4.452 3.546 3.465 3.387 4.329 4.212 4.100 3.312 3.240 3.170 3.993 3.890 3.791 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.626 1.605 1.566 1.528 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2.322 2.283 2.246 2.174 2.106 3.037 2.914 2.855 2.798 2.690 2.589 3.605 3.433 3.352 3.274 3.127 2.991 Period 6 5.795 5.601 5.417 Period 7 6.728 6.472 6.230 Period 8 7.652 7.325 7.020 Period 9 8.566 8.162 7.786 Period 10 9.471 8.983 8.530 9.253 8.760 9.385 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.111 3.889 3.784 3.685 3.498 3.326 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.564 4.288 4.160 4.039 3.812 3.605 6.733 6.463 6.210 5.971 5.747 5.535 5.335 4.968 4.639 4.487 4.344 4.078 3.837 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.328 4.946 4.772 4.607 4.303 4.031 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.650 5.216 5.019 4.833 4.494 4.192 Period 11 10.368 9.787 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.453 5.234 5.029 4.656 4.327 Period 12 11.255 10.575 9.954 8.863 8.384 7.943 7.536 7.161 6.814 6.194 5.660 5.421 5.197 4.793 4.439 Period 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.424 5.842 5.583 5.342 4.910 4.533 Period 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.628 6.002 5.724 5.468 5.008 4.611 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 6.811 6.142 5.847 5.575 5.092 4.675 Period 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 6.974 6.265 5.954 5.669 5.162 4.730 Period 17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.120 6.373 6.047 5.749 5.222 4.775 Period 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.250 6.467 6.128 5.818 5.273 4.812 Period 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 6.198 5.877 5.316 4.844 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.469 6.623 6.259 Period 21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649 7.562 6.687 6.312 Period 22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.442 8.772 7.645 6.743 6.359 Period 23 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883 7.718 6.792 6.399 Period 24 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985 7.784 6.835 6.434 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077 7.843 6.873 6.464 Period 26 22.795 20.121 17.877 15.983 14.375 13.003 11.826 10.810 9.929 9.161 7.896 6.906 6.491 6.118 5.480 4.956 Period 27 23.560 20.707 18.327 16.330 14.643 13.211 11.987 10.935 10.027 9.237 7.943 6.935 6.514 6.136 5.492 4.964 Period 28 24.316 21.281 18.764 16.663 14.898 13.406 12.137 Period 29 25.066 21.844 19.188 16.984 15.141 13.591 12.278 Period 30 25.808 22.396 19.600 17.292 15.372 13.765| 12.409 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 Period 50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 5.929 5.353 4.870 5.973 5.384 4.891 6.011 5.410 4.909 6.044 5.432 4.925 6.073 5.451 4.937 6.097 5.467 4.948 11.051 10.116 9.307 7.984 6.961 6.534 6.152 5.502 4.970 11.158 10.198 9.370 8.022 6.983 6.551 6.166 5.510 4.975 11.258 10.274 9.427 8.055 7.003 6.566 6.177 5.517 4.979 11.925 10.757 9.779 8.244 7.105 6.642 6.233 5.548 4.997 12.233 10.962 9.915 8.304 7.133 6.661 6.246 5.554 4.999 Present Value of $1 Periods 1% 2% 3% Period 1 0.990 0.980 0.971 Period 2 0.980 0.961 0.943 Period 3 0.971 0.942 0.915 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 Period 5 0.951 0.906 0.863 0.822 0.784 4% 5% 6% 0.962 0.952 0.925 0.907 0.943 0.890 0.873 0.889 0.864 0.840 0.816 0.661 0.577 0.505 0.735 0.681 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.507 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.452 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.404 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.361 Period 10 0.905 0.820 0.744 0.676 0.614 0.463 0.422 0.386 0.322 Period 11 0.896 0.804 0.722 0.650 0.585 Period 12 0.887 0.788 0.701 0.625 0.557 Period 13 0.879 0.773 0.681 0.601 0.530 Period 14 0.870 0.758 0.763 0.747 0.713 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.718 0.694 0.794 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 0.650 0.621 0.567 0.519 0.497 0.476 0.437 0.402 0.558 0.508 0.456 0.432 0.410 0.370 0.335 0.400 0.376 0.354 0.314 0.279 0.351 0.327 0.305 0.266 0.233 0.308 0.284 0.263 0.225 0.194 0.270 0.247 0.227 0.191 0.162 0.527 0.475 0.497 0.444 0.469 0.415 0.442 0.388 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.429 0.388 0.350 0.287 0.397 0.356 0.319 0.257 0.368 0.326 0.290 0.229 0.340 0.299 0.263 0.205 0.315 0.275 0.239 0.183 Period 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 Period 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 Period 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 Period 19 0.828 0.686 0.570 0.475 Period 20 0.820 0.673 0.554 0.456 0.377 0.396 0.331 0.277 0.232 0.312 0.258 0.250 0.212 0.180 0.194 0.164 0.215 0.178 0.149 Period 21 0.811 0.660 0.538 0.439 0.359 Period 22 0.803 0.647 0.522 0.422 0.342 Period 23 0.795 0.634 0.507 0.406 0.326 0.262 Period 24 0.788 0.622 0.492 0.390 0.310 0.247 Period 25 0.780 0.610 0.478 0.375 0.295 0.294 0.242 0.278 0.211 0.197 0.158 0.233 0.184 0.146 0.199 0.164 0.135 0.226 0.184 0.150 0.123 0.170 0.138 0.112 0.126 0.102 0.116 0.092 0.163 0.123 0.107 0.146 0.108 0.093 0.080 0.060 0.045 0.130 0.095 0.081 0.069 0.051 0.038 0.116 0.083 0.070 0.060 0.043 0.031 0.104 0.073 0.061 0.051 0.037 0.026 0.093 0.064 0.053 0.044 0.031 0.022 0.083 0.056 0.046 0.038 0.026 0.018 0.074 0.066 0.059 0.237 0.215 0.195 0.162 0.135 0.208 0.187 0.168 0.137 0.112 0.182 0.163 0.145 0.116 0.093 0.160 0.141 0.125 0.099 0.078 0.140 0.123 0.108 0.084 0.065 0.093 0.071 0.054 0.049 0.040 0.033 0.022 0.015 0.043 0.035 0.028 0.019 0.013 0.038 0.030 0.024 0.016 0.010 Period 26 0.772 0.598 0.464 0.361 0.281 Period 27 0.764 0.586 0.450 0.347 0.268 0.220 0.172 0.135 0.106 0.084 0.207 0.161 0.125 0.098 0.076 Period 28 0.757 0.574 0.437 0.333 0.255 Period 29 0.749 0.563 0.424 0.321 0.243 Period 30 0.742 0.552 0.412 0.308 0.231 0.174 0.196 0.150 0.116 0.185 0.141 0.107 0.131 0.099 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 Period 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.053 0.033 0.026 0.021 0.014 0.009 0.047 0.029 0.023 0.018 0.011 0.007 0.090 0.069 0.042 0.026 0.020 0.016 0.010 0.006 0.082 0.063 0.037 0.022 0.017 0.014 0.008 0.005 0.075 0.057 0.033 0.020 0.015 0.012 0.007 0.004 0.046 0.032 0.022 0.011 0.021 0.013 0.009 0.003 0.005 0.004 0.003 0.001 0.001 0.001 0.001 0.001