Labeau Products, Ltd., of Perth, Australia, has $29,000 to invest. The company i

Question

Labeau Products, Ltd., of Perth, Australia, has $29,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:

  

  

  

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

  

Determine the net present values. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

     

Labeau Products, Ltd., of Perth, Australia, has $29,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:

Explanation / Answer

a)

So, project X is viable.

Project X Calculations Years 0 1 2 3 4 5 6 A Investment -29000 B Cash Flows 0 8000 8000 8000 8000 8000 8000 C = A + B Net Cash Flows -29000 8000 8000 8000 8000 8000 8000 D PV factor @15% 1 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 E = C x D Present Values -29000.00 6956.52 6049.15 5260.13 4574.03 3977.41 3458.62 F = Sum E Net Present Value 1275.86

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