Labeau Products, Limited, of Perth, Australia, has $34,000 to invest. The company is trying to...
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Labeau Products, Limited, of Perth, Australia, has $34,000 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
$ 34,000
$ 34,000
Annual cash inflows
$ 9,000
Single cash inflow at the end of 6 years
$ 60,000
Life of the project
6
years
6
years
The companys discount rate is 14%.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
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?
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