Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment....

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Keller Construction is considering two new investments. ProjectE calls for the purchase of earthmoving equipment. Project Hrepresents an investment in a hydraulic lift. Keller wishes to usea net present value profile in comparing the projects. Theinvestment and cash flow patterns are as follows: Use Appendix Bfor an approximate answer but calculate your final answer using theformula and financial calculator methods.

Project E Project H
($45,000 Investment) ($40,000 Investment)
Year Cash Flow Year Cash Flow
1 $ 12,000 1 $ 21,000
2 15,000 2 18,000
3 18,000 3 12,000
4 25,000

a. Determine the net present value of the projectsbased on a zero percent discount rate.

Project E:
Project H:

b. Determine the net present value of the projectsbased on a discount rate of 13 percent. (Do not roundintermediate calculations and round your answers to 2 decimalplaces.)

Project E:
Project H:
c. If the projects are not mutually exclusive,which project(s) would you accept if the discount rate is 13percent?

Project E
Project H
Both H and E

Answer & Explanation Solved by verified expert

4.5 Ratings (1149 Votes)

aProject E Net present value is solved using a financial calculator The steps to solve on the financial calculator Press the CF button CF0 45000 It is entered with a negative sign since it is a cash outflow Cash flow for all the years should be entered Press Enter and down arrow after inputting each cash flow After entering the last cash flow press the NPV button and enter the discount rate of 0 Press the down arrow and CPT buttons to get the net present value See Answer

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Keller Construction is considering two new investments. ProjectE calls for the purchase of earthmoving equipment. Project Hrepresents an investment in a hydraulic lift. Keller wishes to usea net present value profile in comparing the projects. Theinvestment and cash flow patterns are as follows: Use Appendix Bfor an approximate answer but calculate your final answer using theformula and financial calculator methods. Project EProject H($45,000 Investment)($40,000 Investment)YearCash FlowYearCash Flow1$12,0001$21,000215,000218,000318,000312,000425,000a. Determine the net present value of the projectsbased on a zero percent discount rate. Project E:Project H:b. Determine the net present value of the projectsbased on a discount rate of 13 percent. (Do not roundintermediate calculations and round your answers to 2 decimalplaces.) Project E:Project H:c. If the projects are not mutually exclusive,which project(s) would you accept if the discount rate is 13percent? Project EProject HBoth H and E

Project E			Project H
($45,000 Investment)			($40,000 Investment)
Year	Cash Flow		Year	Cash Flow
1	$	12,000	1	$	21,000
2		15,000	2		18,000
3		18,000	3		12,000
4		25,000