The management of Advanced Alternative Power Inc. is considering two capital inv
ID: 2709912 • Letter: T
Question
The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:
The wind turbines require an investment of $887,600, while the biofuel equipment requires an investment of $911,100. No residual value is expected from either project.
Required:
1a. Compute the net present value for each project. Use a rate of 6% 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, round to the nearest dollar.
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.
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 percent.
Year Wind Turbines Biofuel Equipment 1 $280,000 $300,000 2 280,000 300,000 3 280,000 300,000 4 280,000 300,000Explanation / Answer
Answer:1 a
Answer:1b
Answer:2
Wind Turbines Explanation Bio Fuel Equipment Explanation Present value of annual net cash flows 970200 280000*3.465 1039500 300000*3.465 Less amount to be invested 8,87,600 911100 Net present value 82,600 128400Related Questions
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