Labeau Products, Ltd., of Perth, Australia, has $35.000 to invest The company tr

Question

Labeau Products, Ltd., of Perth, Australia, has $35.000 to invest The company trying to decide Between two allernative uses for the funds as follows: Investment required Annual cash inflows Single cash inflow at the end of 6 years Life al the project The company's discount rate is 18%. Click here to view Exhibit 11B-1 and Exhibit 11B-2. to determine the appropriate discount factors) using tables. Required: Determine the net present values (Any cash outflows should be indicated by a minus sign. Us the appropriate table to determine the discount factor(s).)

Explanation / Answer

Project X New 1 2 3 4 5 6 initial investment 35000 35000 40700 53054 73024.28 99239.91 130576.7 Annual cash inflows 12000 24000 36000 48000 60000 72000 Total cash flows 35000 47000 64700 89054 121024.3 159239.9 202576.7 Discount factor 6300 8460 11646 16029.72 21784.37 28663.18 Present value Net present value 35000 40700 53054 73024.28 99239.91 130576.7 173913.5 Project y initial investment 35000 35000 47300 77300 122300 182300 257300 Annual cash inflows 15000 30000 45000 60000 75000 90000 Total cash flows 35000 50000 77300 122300 182300 257300 347300 Discount factor 2700 Present value Net present value 35000 47300 77300 122300 182300 257300 347300

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