I need help with a Financing problem. I have a test tomorrow and need to show my work on how I solved the problem.
Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a new present value profile in comparing the projects. The investment and cash flow patterns are as following:
Project E ($20,000 Investment)Year Cash Flow1....................$50002.....................60003.....................70004.....................10,000
Project H ($20,000 InvestmentYear Cash Flow1....................$16,0002......................50003......................4000
a) Determine the net present value of the projects based on a 0% discount rate
b) Determine the net present value of the projects based on a 9% discount rate.
c) The internal rate of return on Project E is 13.25%, and the internal rate of return on Project H is 16.30%.
d) If the two projects are not mutually exclusive, what would your acceptance or rejection decision be if the cost of capital (discount rate) is 8%? (Use the net present value profile no actual numbers are necessary)
e) If the two projects are mutually exclusive, what would be your decision if the cost of capital is 6%, 13%, and 18%? (use net present value profile for your answer.