Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,000 and will produce cash flows as follows: End of Year 1 2 Investment A $8,000 $ 8,000 0 8,000 24,000 The present value factors of $1 each year at 15% are: 1 2 8.8696 0.7561 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 Which investment should Alfarsi choose? Which investment should Alfarsi choose? Only Investment A is acceptable. Only Investment B is acceptable. Both investments are acceptable, but A should be selected because it has the greater net present value. Both investments are acceptable, but B should be selected because it has the greater net present value. O Neither machine is acceptable
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started