Question
(Ignore income taxes in this problem.) The Sawyer Corporation has $90,000 to invest and is considering two different projects, X and Y. The following data
(Ignore income taxes in this problem.) The Sawyer Corporation has $90,000 to invest and is considering two different projects, X and Y. The following data are available on the projects:
Click here to view Exhibit 8B-1 and Exhibit 8B-2 to determine the appropriate discount factor(s) using tables.
| Project X | Project Y | |||
| Cost of equipment needed now | $ | 90,000 | ||
| Working capital requirement | - | $ | 90,000 | |
| Annual cash operating inflows | $ | 25,000 | $ | 20,000 |
| Salvage value in 5 years | $ | 9,000 | - | |
Both projects will have a useful life of 5 years; at the end of 5 years, the working capital will be released for use elsewhere. Sawyer's discount rate is 13%. The net present value of project Y is closest to:
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Managerial Accounting Principles Of Accounting II
Authors: Eric W. Noreen, Peter C. Brewer, Ray H. Garrison
6th Edition
0077681258, 978-0077681258
