Labeau Products, Ltd., of Perth, Australia, has $21,000 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	$	21,000	$	21,000
Annual cash inflows	$	8,000
Single cash inflow at the end of 6 years			$	50,000
Life of the project	6 years		6 years

The companys discount rate is 18%.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required:

a.

Determine the net present values. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)

	Now	1	2	3	4	5	6
Project X
Initial Investment
Annual cash flows
total cash flows
discount factor (18%)
present value
net present value
Project Y:
initial investment
single cash flows
total cash flows
discount factor (18%)
present value
net present value

b.

Which alternative would you recommend that the company accept?

	Project X
	Project Y