Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,400 and will produce cash flows as follows: End of Year Investment A B 1 $ 8,400 $ 0 2 8,400 0 3 8,400 25,200 The present value factors of $1 each year at 15% are: 1 0.8696 2 0.7561 3 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment B is: Back
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,400 and will produce cash flows as follows: End of Year Investment A B 1 $ 8,400 $ 0 2 8,400 0 3 8,400 25,200 The present value factors of $1 each year at 15% are: 1 0.8696 2 0.7561 3 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment B is: Back
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Alfarsi Industries uses the
| End of Year |
Investment | |||||
| A | B | |||||
| 1 | $ | 8,400 | $ | 0 | ||
| 2 | 8,400 | 0 | ||||
| 3 | 8,400 | 25,200 | ||||
The present value factors of $1 each year at 15% are:
| 1 | 0.8696 |
| 2 | 0.7561 |
| 3 | 0.6575 |
The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment B is:
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