Question
Labeau Products, Limited, of Perth, Australia, has $28,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:
Labeau Products, Limited, of Perth, Australia, has $28,000 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 | $ 28,000 | $ 28,000 | ||
| Annual cash inflows | $ 8,000 | |||
| Single cash inflow at the end of 6 years | $ 40,000 | |||
| Life of the project | 6 | years | 6 | years |
The companys discount rate is 10%.
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?
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Mcgraw Hills Homework Manager Access Code To Accompany Introduction To Managerial Accounting
Authors: Peter Brewer, Ray Garrison, Eric Noreen
3rd Edition
0073264938, 978-0073264936
