C | ezto.mheducation.com/hm.tpx 6.00 points Labeau Products, Ltd., of Perth, Aus
ID: 2579505 • Letter: C
Question
C | ezto.mheducation.com/hm.tpx 6.00 points Labeau Products, Ltd., of Perth, Australia, has $12.000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest in Invest in Project XProject Y $ 12.000 $ 12,000 $ 4,000 Investment required Annual cash inflows Single cash inflow at the end of 6 years Life of the project $ 28.000 6 years6 years The company's discount rate is 16%. Click here to view Exhibit 138-1 and Exhibit 138-2, to determine the appropriate discount factor(s) using tables Re Virermino the net present values a. Determine the net present values Project X roject Y Net Present Value b. Which alternative would you recommend that the company accept? ) Project X Project YExplanation / Answer
a.
Net present value = Present value of cash inflows - Present value of cash outflows
b.
Which alternative would you recommend that the company accept?
Project X.
Project X Project Y Present value of cash inflows 14,740 (4,000*3.685) 11,480 (28,000*0.410) Present value of cash outflows 12,000 12,000 Net present value 2,740 (520)Related Questions
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