Labeau Products, Ltd., of Perth, Australia, has $16,000 to invest. The company is trying to decide between
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Labeau Products, Ltd., of Perth, Australia, has $16,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:
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Investment required Annual cash inflows Single cash inflow at the end of 6 years Life of the project The company's discount rate is 15% ProjectX: Initial investment Annual cash inflows Total cash flows Discount factor (15%) Present value Net present value Project Y: Required: a. Determine the net present values. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.) Initial investment Single cash inflows Total cash flows Discount factor (15%) Present value Net present value Invest in Project X $ 18,000 $5,000 Now 6 years Invest in Project Y 1 $ 16,000 $ 35,000 8 years b. Which alternative would you recommend that the company accept? O Project X Ⓒ Project Y 2 3 4 5 6 Investment required Annual cash inflows Single cash inflow at the end of 6 years Life of the project The company's discount rate is 15% ProjectX: Initial investment Annual cash inflows Total cash flows Discount factor (15%) Present value Net present value Project Y: Required: a. Determine the net present values. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.) Initial investment Single cash inflows Total cash flows Discount factor (15%) Present value Net present value Invest in Project X $ 18,000 $5,000 Now 6 years Invest in Project Y 1 $ 16,000 $ 35,000 8 years b. Which alternative would you recommend that the company accept? O Project X Ⓒ Project Y 2 3 4 5 6
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Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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