Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company i

Question

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:

  

  

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

    

Determine the net present values. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)

     

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:

Explanation / Answer

(a) Statement showing evaluation of projects at discount factor of 10%

(b) Project X should be accepted since it has higher NPV

Particulars PVF Project-X Project-Y Cash inflows Project -X (1-6) 4.355 52260 - Project -Y (6th year) 0.564 - 50760 P.V. of cash inflows-A 52260 50760 Cash outflow-B 35000 35000 NPV(A-B) 17260 15760

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