Question
Labeau Products, Ltd., of Perth, Australia, has $23,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:
| Labeau Products, Ltd., of Perth, Australia, has $23,000 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 | $ | 23,000 | $ | 23,000 |
| Annual cash inflows | $ | 7,000 | ||
| Single cash inflow at the end of 6 years | $ | 43,000 | ||
| Life of the project | 6 years | 6 years | ||
|
| ||||
| The companys discount rate is 16%. |
| 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. |
| b. | Which alternative would you recommend that the company accept? | ||||
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Efficient Auditing Of Private Companies A Guide To Audit Planning Implementation And Control
Authors: The Institute Of Chartered Accountants
1st Edition
1841400432, 978-1841400433
