Question

Labeau Products, Ltd., of Perth, Australia, has $11,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: points Invest Invest in in Project Project eBook Investment required Annual cash inflows Single cash inflow at the end of 6 years Life of the project $11,000 $11,000 $ 4,000 $ 25,000 6 years 6 years Ask The company's discount rate is 15%. Print Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. References Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept? Complete this question by entering your answers in the tabs below. Required Required Required Compute the net present value of Project X. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Required 1 Required 2 >

Answer 1

* Mpy of project x or Protial investment = $11,000 Annual fash flows - $4000 Py factor tol Gyears @ 15% = 3.784 ... puesent value of cash cntious - $ 4000 x 3.484 = $ 193 15136 -. NPV = $15,136 - $11,000 $ 4136 * NPV of project Yr Pnitial investment - $ 11000 Single cash flow at end o 6th year = $25,000 pro Rs. 1 @ 15% at the end of 6th year 0.432 . Pv og amount. $25,000x 0.482 = $ 10808 MPY - $ 10808 - $11,000 & - $192

Req 1 MPV of Req 21 Npy of project x Puoject y = $4136 :- $192 Req 8: cwhich project coocued to ue commed the company accept Project " Since now of project & is positive do is acceptable.