Labeau Products, Ltd., of Perth, Australia, has $19,000 to invest. The company i

Question

Labeau Products, Ltd., of Perth, Australia, has $19,000 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 $19,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:

Explanation / Answer

Now 1 2 3 4 5 6 Project X Initial Investment -19,000.00 Annual cash inflows     6,000.00 6,000.00 6,000.00 6,000.00 6,000.00     6,000.00 Total cash flows -19,000.00     6,000.00 6,000.00 6,000.00 6,000.00 6,000.00     6,000.00 Discount factor (14%) 1 0.877193 0.769468 0.674972 0.59208 0.519369 0.4555865 Present value -19,000.00     5,263.16 4,616.81 4,049.83 3,552.48 3,116.21     2,733.52 Net present value       4,332.01 Now 1 2 3 4 5 6 Project X Initial Investment -19,000.00 Single cash inflows 40,000.00 Total cash flows -19,000.00                  -                  -                  -                  -                  -   40,000.00 Discount factor (14%) 1 0.877193 0.769468 0.674972 0.59208 0.519369 0.4555865 Present value -19,000.00                  -                  -                  -                  -                  -   18,223.46 Net present value         -776.54

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