Question: Exercise 14-14 (Algo) Comparison of Projects Using Net Present Value [LO14-2] Labeau Products, Limited, of Perth, Australia, has $25,000 to invest. The company is trying

Exercise 14-14 (Algo) Comparison of Projects Using Net Present Value [LO14-2]

Labeau Products, Limited, of Perth, Australia, has $25,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:

Invest in Project XInvest in Project YInvestment required$ 25,000 $ 25,000 Annual cash inflows$ 8,000 Single cash inflow at the end of 6 years $ 60,000 Life of the project6years6years

The companys discount rate is 16%.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Compute the net present value of Project X.

2. Compute the net present value of Project Y.

3. Which project would you recommend the company accept?

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