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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 1 2 3 Investment B $8,000 $ 0 8,000 0 8,000 24,000 The present value factors of $1 each year at 15% are: 1 2 3 0.8696 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? Multiple Choice Both investments are acceptable, but A should be selected because it has the greater net present value Both investments are acceptable, but should be selected because it has the greater net present value. Neither machine is acceptable Only investment is acceptable. Only Investment A is acceptable
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