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Stellan Manufacturing is considering the following two investment​ proposals: Proposal X Proposal Y Investment $ 724...

Stellan Manufacturing is considering the following two investment​ proposals:

Proposal X

Proposal Y

Investment

$ 724 comma 000$724,000

$ 510 comma 000$510,000

Useful life

5 years

4 years

Estimated annual net cash inflows received at the end of each year

$ 158 comma 000$158,000

$ 106 comma 000$106,000

Residual value

$ 66 comma 000$66,000

​$0

Depreciation method

Straightminus−line

Straightminus−line

Annual discount rate

​10%

​9%

Present value of an ordinary annuity of​ $1:

​8%

​9%

​10%

1

0.926

0.917

0.909

2

1.783

1.759

1.736

3

2.577

2.531

2.487

4

3.312

3.240

3.170

5

3.993

3.809

3.791

6

4.623

4.486

4.355

Compute the present value of the future cash inflows from Proposal Y.

A.

$272,085

B.

$295,800

C.

$343,440

D.

$255,000

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Answer #1

Correct answer--------(C) $343,440

Working

Present value schedule
Year Payments PVA Factor @9% Present value (106000 x 3.240)
1-4 $ 106,000.00 3.240 $      343,440
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