Labeau Products, Ltd., of Perth, Australia, has $26,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest in Project X Invest in Project Y Investment required $ 26,000 $ 26,000 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 12%. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor (s) using tables. Required: a. Determine the net present values. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor (s).)

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Business

Dominik Freeman

19 April, 21:00

Labeau Products, Ltd., of Perth, Australia, has $26,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest in Project X Invest in Project Y Investment required $ 26,000 $ 26,000 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 12%. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor (s) using tables. Required: a. Determine the net present values. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor (s).)

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Julianne Decker · Answer 1

Project X NPV = $6,891.26

Project Y NPV = ($668.44)

Explanation:

Project X

Yr Cashflow PV factor at 12% Present value

0 ($26,000) 1.0000 ($26,000.00)

1 8,000.00 0.8929 $7,142.86

2 8,000.00 0.7972 $6,377.55

3 8,000.00 0.7118 $5,694.24

4 8,000.00 0.6355 $5,084.14

5 8,000.00 0.5674 $4,539.41

6 8,000.00 0.5066 $4,053.05

NPV $6,891.26

Project Y

Yr Cashflow PV factor at 12% Present value

0 ($26,000) 1.0000 ($26,000.00)

1 - 0.8929 $0.00

2 - 0.7972 $0.00

3 - 0.7118 $0.00

4 - 0.6355 $0.00

5 - 0.5674 $0.00

6 50,000.00 0.5066 $25,331.56

NPV ($668.44)