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

Investment required

$ 35,000

Annual cash inflows

$12,000

Life of the project

6 years

Invest in

Project Y

Investment required

$ 35,000

Single cash inflow at the end of 6 years

$90,000

Life of the project

6 years

The companys discount rate is 18%.

Click here to view Exhibit 13B-1 and Exhibit 13B-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. Round discount factor(s) to 3 decimal places.)

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

Now 2 3 4 5 6 Project X: Initial investment Annual cash inflows Total cash flows DiSCOunt factor 18% Present value Net present value Project Y: Initial investment Single cash inflows Total cash flows Discount factor 18% Present value Net present value