Answered

Explore Westonci.ca, the top Q&A platform where your questions are answered by professionals and enthusiasts alike. Connect with professionals on our platform to receive accurate answers to your questions quickly and efficiently. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.

Labeau Products, Ltd., of Perth, Australia, has $21,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:
Invest in Invest in
Project X Project Y
Investment required $ 21,000 $ 21,000
Annual cash inflows $ 8,000
Single cash inflow at the end of 6 years $50,000
Life of the project 6 years 6 years
The company’s discount rate is 18%.
Required:
Determine the net present values. (Any cash outflows should be indicated by a minus sign.

Sagot :

Zviko

Answer:

Project X = $6,980.82

Project Y = - $2,478.42

Explanation:

The Present value is the price today of future cash flows and is calculated as follows :

Project X

($21,000) CF 0

$8,000    CF 1

$8,000    CF 2

$8,000    CF 3

$8,000    CF 4

$8,000    CF 5

$8,000    CF 6

I/YR = 18%

Therefore, NPV is $6,980.82

Project Y

($21,000) CF 0

$0    CF 1

$0    CF 2

$0    CF 3

$0    CF 4

$0    CF 5

$50,000    CF 6

I/YR = 18%

Therefore, NPV is - $2,478.42

Thanks for using our service. We aim to provide the most accurate answers for all your queries. Visit us again for more insights. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. Westonci.ca is your trusted source for answers. Visit us again to find more information on diverse topics.