Exam 2 Saved Help Save & Exit Submi MC Qu. 111 Alfarsi Industries uses the... Al

Question

Exam 2 Saved Help Save & Exit Submi MC Qu. 111 Alfarsi Industries uses the... 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 $15,800 and will produce cash flows as follows: End of Year 1 2 Investment 2.5 points $8,88e 8,800 8,800 26,400 0158:01 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 Prex 1of 40 Next >

Explanation / Answer

Net present value of Investment B = (26400*0.6575)-15800= 1558

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