Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two
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Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow.
| Proposal X | Proposal Y | |
|---|---|---|
| Required investment | $660,000 | $660,000 |
| Annual after-tax cash inflows | 132,000 | |
| After-tax cash inflows at the end of years 3, 6, 9, and 12 | 396,000 | |
| Life of project | 12 years | 12 years |
Using net present value analysis, which proposal is the more attractive?
Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value.
| Proposal X | Proposal Y | |
|---|---|---|
| Net present value | ||
| Initial outflows | Answer | Answer |
| PV of future cash flows | Answer | Answer |
| Net present value | Answer | Answer |
Which proposal is more attractive?
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