Nylan Manufacturing is considering two alternative investment proposals with the
ID: 2486396 • Letter: N
Question
Nylan Manufacturing is considering two alternative investment proposals with the following details:
Proposal X
Proposal Y
Investment
$730,000
$514,000
Useful life
5 years
4 years
Estimated annual net cash inflows
$166,000
$106,000
Residual value
$60,000
$0
Depreciation method
Straightline
Straightline
Discount rate
10%
9%
What is the total present value of future cash inflows from Proposal X?
Present value of annuity of $1:
A. $659,099
B. $666,566
C. $629,306
D. $821,523
Proposal X
Proposal Y
Investment
$730,000
$514,000
Useful life
5 years
4 years
Estimated annual net cash inflows
$166,000
$106,000
Residual value
$60,000
$0
Depreciation method
Straightline
Straightline
Discount rate
10%
9%
Explanation / Answer
CALCUALTION OF TOTAL PRESENT VALUE OF PROPOSAL X :
PRESENT VALUE OF RESIDUAL VALUE (60,000 X 0.6209) = 37,254
TOTAL PRESENT VALUE OF PROPOSAL X (629,273+37,254) = $666,527
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