Question
Exercise 12-14 (Algo) Comparison of Projects Using Net Present Value [LO12-2] Labeau Products, Limited, of Perth, Australia, has $19,000 to invest. The company is trying
Exercise 12-14 (Algo) Comparison of Projects Using Net Present Value [LO12-2]
Labeau Products, Limited, of Perth, Australia, has $19,000 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 | $ 19,000 | $ 19,000 | ||
| Annual cash inflows | $ 6,000 | |||
| Single cash inflow at the end of 6 years | $ 40,000 | |||
| Life of the project | 6 | years | 6 | years |
The companys discount rate is 14%.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. Compute the net present value of Project X.
2. Compute the net present value of Project Y.
3. Which project would you recommend the company accept?
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Financial And Managerial Accounting The Basis For Business Decisions
Authors: Jan Williams, Sue Haka, Mark S Bettner
13th Edition
0072942827, 978-0072942828
