Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying to decide betweentwo alternative uses for the funds as follows:Invest in Invest inProject X Project YInvestment required ...................................... $35,000 $35,000Annual cash inflows ...................................... $9,000Single cash inflow at the end of 10 years ..... $150,000Life of the project .......................................... 10 years 10 yearsThe company’s discount rate is 18%.Required:(Ignore income taxes.) Which alternative would you recommend that the company accept? Show all computations using the net present value approach. Prepare separate computations for each project.
Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying to decide between
two alternative uses for the funds as follows:
Invest in Invest in
Project X Project Y
Investment required ...................................... $35,000 $35,000
Annual cash inflows ...................................... $9,000
Single
Life of the project .......................................... 10 years 10 years
The company’s discount rate is 18%.
Required:
(Ignore income taxes.) Which alternative would you recommend that the company accept? Show all computations using the
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