Determine the net present values.
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Labeau Products, Ltd., of Perth, Australia, has $23,000 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 |
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Investment required | $ | 23,000 | $ | 23,000 |
Annual cash inflows | $ | 7,000 | ||
Single cash inflow at the end of 6 years | $ | 43,000 | ||
Life of the project | 6 years | 6 years |
The company’s discount rate is 16%. |
Required: |
a. | Determine the net present values.
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