Question

Blue Spruce Company is considering two new projects, each requiring an equipment investment of $101,800. Each project will last for three years and produce the following cash flows:
Year Cool Hot
1 $40,400 $44,400
2 45,400 44,400
3 50,400 44,400
136,200 $133,200

The equipment will have no salvage value at the end of its three-year life. Blue Spruce Company uses straight-line depreciation and requires a minimum rate of return of 12%.

Present value data are as follows:
Period 12%
1 0.89286
2 0.79719
3 0.71178

Present Value of an Annuity of 1
Period 12%
1 0.89286
2 1.69005
3 2.40183

Required:
Compute the net present value of each project.

Answer 1

Answer:

1.00.87.3

Explanation: i dont know

Answer 2

Answer:

50,400 44,400

0.79719

1.69005