&Bral; Paul Laurence Dun... Camous Parent Por..AOL.com-News, s... ,11,13 6 Seved

Question

&Bral; Paul Laurence Dun... Camous Parent Por..AOL.com-News, s... ,11,13 6 Seved Help Save&Exit; 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 $15,600 and will produce cash flows as follows End of Year $8,600 2 8,600 8,60025,800 The present value factors of $1 each year at 15% are: 0.8696 2 0.7561 3 0.6575 The present value of an annuity of $1 for 3 years at 15% is 22832 The net present value of investment B is K Prex 19 of 40 Next 30

Explanation / Answer

E. $1,364

Investment B: Net cash flows Present value factor Present value of net cash flows Year 3 $25,800 0.6575 $16,964 Initial investment ($15,600) Net present value $1,364

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