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3. Labeau Products, Ltd., of Perth, Australia, has $18,000 to invest. The company is trying to decide between two alternative uses for the funds as

3.

Labeau Products, Ltd., of Perth, Australia, has $18,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:

Invest in Project X Invest in Project Y
Investment required $ 18,000 $ 18,000
Annual cash inflows $ 7,000
Single cash inflow at the end of 6 years $ 41,000
Life of the project 6 years 6 years

The companys discount rate is 17%.

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

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.)

b. Which alternative would you recommend that the company accept?
Project X
Project Y

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