Question
Net Present Value Analysis Cooper Company must evaluate two capital expenditure proposals. Coopers hurdle rate is 10%. Data for the two proposals follow. Proposal X
Net Present Value Analysis Cooper Company must evaluate two capital expenditure proposals. Coopers hurdle rate is 10%. Data for the two proposals follow.
| Proposal X | Proposal Y | |
|---|---|---|
| Required investment | $120,000 | $120,000 |
| Annual after-tax cash inflows | 24,000 | |
| After-tax cash inflows at the end of years 3, 6, 9, and 12 | 72,000 | |
| Life of project | 12 years | 12 years |
Using net present value analysis, which proposal is the more attractive? Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value.
| Proposal X | Proposal Y | |
|---|---|---|
| Net present value | ||
| Initial outflows | =_______ | =_______ |
| PV of future cash flows | =_______ | =_______ |
| Net present value | =_______ | =_______ |
Which proposal is more attractive? Answer: Proposal X or Proposal Y
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Audit Function Strategy Driving Audit Value The Best Practice Strategy Guide For Maximising The Audit Added Value At The Internal Audit Function Level Volume 1
Authors: Hans Beumer
1st Edition
3906861139, 978-3906861135
