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TB MC Qu. 24-111 (Algo) Alfarsi Industries uses the net present value... Alfarsi Industries uses the net present value method to make investment decisions and

TB MC Qu. 24-111 (Algo) Alfarsi Industries uses the net present value...

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,300 and will produce cash flows as follows:

End of Year Investment
A B
1 $ 8,300 $ 0
2 8,300 0
3 8,300 24,900

The present value factors of $1 each year at 15% are:

1 0.8696
2 0.7561
3 0.6575

The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment B is:

Multiple Choice

  • $1,072.

  • $(16,372).

  • $9,600.

  • $41,272.

  • $-6,312.

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