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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 | |||||
| ($25,000 investment) | ($27,000 investment) | |||||
| Year | Cash flow | Year | Cash flow | |||
| 1 | $ 6,000 | 1 | $ 18,000 | |||
| 2 | 9,000 | 2 | 9,000 | |||
| 3 | 10,000 | 3 | 7,000 | |||
| 4 | 13,000 | |||||
| (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 9 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 | $ |
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