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 net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project E | Project H | |||||||

($32,000 Investment) | ($27,000 Investment) | |||||||

Year | Cash Flow | Year | Cash Flow | |||||

1 | $ | 10,000 | 1 | $ | 15,000 | |||

2 | 13,000 | 2 | 13,000 | |||||

3 | 14,000 | 3 | 11,000 | |||||

4 | 16,000 | |||||||

**a.**Determine the net present value of the projects based on a zero percent discount rate.

– Determine the net present value of the projects based on a discount rate of 9 percent.

**c.**If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 9 percent?