Question
Simms Manufacturing is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $620,000 $400,000 Useful life 8 years 8 years
Simms Manufacturing is considering two alternative investment proposals with the following data:
|
| Proposal X | Proposal Y |
| Investment | $620,000 | $400,000 |
| Useful life | 8 years | 8 years |
| Estimated annual net cash inflows for 8 years | $130,000 | $80,000 |
| Residual value | $0 | $0 |
| Depreciation method | Straight-line | Straight-line |
| Discount rate | 9% | 10% |
What is the net present value of Proposal X, taking into consideration the initial outlay and the subsequent cash inflows?
| Present Value of an Annuity of $1 |
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|
|
|
|
|
|
| 5% | 6% | 7% | 8% | 9% | 10% |
| 8 | 6.463 | 6.210 | 5.971 | 5.747 | 5.535 | 5.335 |
| 9 | 7.108 | 6.802 | 6.515 | 6.247 | 5.995 | 5.759 |
| 10 | 7.722 | 7.360 | 7.024 | 6.710 | 6.418 | 6.145 |
| A. | $23,070 positive | |
| B. | $99,550 positive | |
| C. | $13,070 negative | |
| D. | $4,130 negative |
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Energy Management Conservation And Audits
Authors: Anil Kumar, Om Prakash, Prashant Singh Chauhan, Samsher Gautam
1st Edition
0367494930, 978-0367494933
