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Power Engine, Inc. is considering the following two investment proposals: Proposal X Proposal Y Investment $738,000 $508,000 Useful life 5 years 4 years Estimated annual
- Power Engine, Inc. is considering the following two investment proposals:
Proposal X Proposal Y Investment $738,000 $508,000 Useful life 5 years 4 years Estimated annual net cash inflows received at the end of each year $152,000 $100,000 Residual value $62,000 $0 Depreciation method Straight-line Straight-line Annual discount rate 10% 9%
| Proposal X | Proposal Y | |
| Investment | $738,000 | $508,000 |
| Useful life | 5 years | 4 years |
| Estimated annual net cash inflows received at the end of each year | $152,000 | $100,000 |
| Residual value | $62,000 | $0 |
| Depreciation method | Straight-line | Straight-line |
| Annual discount rate | 10% | 9% |
Compute the present value of the future cash inflows from Proposal Y. Present value of an ordinary annuity of $1:
| 8% | 9% | 10% | |
| 1 | 0.926 | 0.917 | 0.909 |
| 2 | 1.783 | 1.759 | 1.736 |
| 3 | 2.577 | 2.531 | 2.487 |
| 4 | 3.312 | 3.240 | 3.170 |
| 5 | 3.993 | 3.809 | 3.791 |
| 6 | 4.623 | 4.486 | 4.355 |
Select one:
A.
$324,000
B.
$271,018
C.
$294,640
D.
$254,000
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
16th Edition
78110939, 978-0078110931
