Exercise 13-11 Comparison of Projects Using Net Present Value [LO1]

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Sharp Company has $21,000 to invest. The company is trying to decide between two alternative uses of the funds as follows:

	Invest in Project A		Invest in Project B
Investment required	$	21,000	$	21,000
Annual cash inflows	$	6,000		$ 0
Single cash inflow at the end of 11 years			$	49,000
Life of the project	12 years		12 years

Sharp Company uses a 15% discount rate. (Ignore income taxes.)

Click here t Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

a.	Determine the net present value. (Negative amounts should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

	Net Present Value
Project A	$
Project B	$

b.

Which investment would you recommend that the company accept?

	Project A
	Project B