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 $15,000 and will produce cash flows as follows: End of Year Investment A Investment B 1 $ 8,000 $0 2 8,000 0 3 8,000 24,000 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 (rounded to the nearest whole dollar) of Investment A is: Question 20Select one: a. $(15,000) b.
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 $15,000 and will produce cash flows as follows: End of Year Investment A Investment B 1 $ 8,000 $0 2 8,000 0 3 8,000 24,000 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 (rounded to the nearest whole dollar) of Investment A is: Question 20Select one: a. $(15,000) b.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $15,000 and will
produce cash flows as follows:
End of Year Investment A Investment B
1 $ 8,000 $0
2 8,000 0
3 8,000 24,000
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 (rounded to the nearest whole dollar)
of Investment A is:
Question 20Select one:
a.
$(15,000)
b.
$9,000
C.
$(20,549)
d.
$18,266
e.
$3,266
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