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Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:

Labeau Products, Ltd., of Perth, Australia, has $35,000 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 $ 35,000 $ 35,000
Annual cash inflows $ 12,000
Single cash inflow at the end of 6 years $ 90,000
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).)

b. Which alternative would you recommend that the company accept?
Project X
Project Y

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