Exercise 14-14 (Algo) Comparison of Projects Using Net Present Value [LO14-2] Labeau Products, Ltd., of Perth, Australia, has $24,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest Invest in in Project Project X Y Investment required Annual cash inflows $24,000 $24,000 $ 8,000 Single cash inflow at the end of 6 years Life of the project 6 years $ 44,000 6 years The company's discount rate is 14%. Click here to view Exhibit 14B-1 and Exhibit 14B-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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the net present value of Project X. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the net present value of Project Y. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Which project would you recommend the company accept? Project X Project Y EXHIBIT 14B-1 Present Value of $1; (1+r)" Periods 4% 5% 6% 1 7% 0.962 0.952 0.943 0.935 2 0.925 0.907 0.890 0.873 8% 9% 0.926 0.917 0.857 0.842 3 0.889 0.864 0.840 0.816 4 0.855 0.823 0.792 0.763 5 6 7 8 0.790 0.746 0.705 0.666 0.630 0.760 0.711 0.665 0.623 0.583 0.731 0.677 0.627 0.582 0.540 9 10 11 0.650 0.585 0.527 0.475 12 13 14 15 16 17 0.513 0.436 0.371 0.317 0.270 0.231 18 0.494 0.416 0.350 0.296 0.250 0.212 19 0.475 0.396 0.331 0.277 0.232 0.194 20 0.456 0.377 0.312 0.258 0.215 0.178 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.198 0.170 0.146 0.130 0.116 0.104 0.180 0.164 0.153 0.138 0.149 0.124 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 10% 11% 12% 13% 14% 15% 0.909 0.901 0.893 0.885 0.877 0.870 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0.423 0.410 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.625 0.557 0.497 0.444 0.397 0.601 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 0.137 0.148 0.135 0.123 0.112 0.103 0.094 0.086 0.124 0.112 0.102 0.092 0.083 0.076 0.069 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 21 0.135 0.112 222222222222 25 0.439 0.359 0.294 0.242 0.199 0.164 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.422 0.342 0.278 0.226 0.184 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 23 0.406 0.326 0.262 0.211 0.170 0.138 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 24 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013 0.010 0.008 0.007 0.006 0.005 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 26 0.361 0.281 0.220 0.172 0.135 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 27 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 28 0.333 0.255 0.196 0.150 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.321 0.243 0.185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0.022 0.017 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 40 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 29 30 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 EXHIBIT 14B-2 Present Value of an Annulty of $1 In Arrears; +[1 (1+r)" Periods 4% 1 2 1.886 5% 6% 0.962 0.952 0.943 0.935 1.859 1.833 1.808 7% 8% 9% 0.926 0.917 1.783 1.759 10% 11% 0.909 0.901 1.736 1.713 3 2.775 2.723 2.673 2.624 2.577 2.531 4 3.630 3.546 5 4.452 4.329 4.212 3.465 3.387 3.312 4.100 3.993 6 5.242 5.076 4.917 4.767 3.240 3.890 4.623 4.486 7 6.002 5.786 5.582 5.389 5.206 5.033 8 6.733 6.463 6.210 5.971 9 7.435 7.108 6.802 10 8.111 7.722 11 8.760 12 9.385 8.306 8.863 13 9.986 6.515 7.360 7.024 7.887 8.384 9.394 8.853 6.247 6.710 7.499 7.139 6.805 7.943 7.536 7.161 8.358 7.904 5.747 5.535 5.995 6.418 7.487 14 10.563 9.899 9.295 8.745 8.244 7.786 15 11.118 10.380 9.712 16 11.652 10.838 10.106 17 18 12.659 11.690 10.828 9.447 12.166 11.274 10.477 9.763 9.122 10.059 9.372 9.108 8.559 8.851 8.061 19 13.134 12.085 11.158 10.336 9.604 20 13.590 12.462 11.470 10.594 9.818 21 22 23 14.451 13.163 12.042 11.061 14.857 13.489 12.303 11.272 24 25 15.247 13.799 12.550 11.469 15.622 14.094 12.783 11.654 26 15.983 14.375 13.003 11.826 27 16.330 14.643 13.211 28 16.663 14.898 13.406 29 30 40 19.793 17.159 15.046 13.332 11.925 8.313 7.824 7.379 6.974 8.544 8.022 7.549 7.120 8.756 8.201 7.702 7.250 8.950 8.365 7.839 7.366 9.129 8.514 7.963 7.469 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 10.201 9.442 8.772 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 10.371 9.580 8.883 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 11.987 10.935 10.027 9.237 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 3.990 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 10.757 9.779 8.951 8.244 7.634 7.105 4.544 4.347 4.166 3.999 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2.011 1.981 1.952 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 3.976 3.981 3.985 6.642 6.233 5.871 5.548 5.258 4.997 4.760