Chapter 11 H k-xD The Mana C ezto.mheducation.com/hm.tpx value: 0.83 points Exer

Question

Chapter 11 H k-xD The Mana C ezto.mheducation.com/hm.tpx value: 0.83 points Exercise 11-11 Comparlson of Projects Using Net Present Value [LO11-2] Modifled 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 $35,000 $12,000 Invest in Project Y $35,000 ent required Annual cash inflows Single cash inflow at the end of 6 years Life of the project $90,000 The company's discount rate is 18%. to view Exhibt 118 1 and Ex tables Required:

Explanation / Answer

Particulars Year Cash Flow PVF @ 18% Present Value Project X Cash Outflow 0 -35000 1 -35000 Cash Inflow 01-06 12000 3.498 41976 NPV of Project X 6976 Project Y Cash Outflow 0 -35000 1 -35000 Cash Inflow 06 90000 0.3704 33336 NPV of Project Y -1664 It is better to opt for Project X with higher NPV

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