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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 Investment A B 1 $8,000 $0 2 8,000 0 3 8,000 24,000 The present value factors of $1 each year at 15% are: 1 0.8696 2 0.7561 3 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 Which investment should Alfarsi choose?
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