Net Present Value AnalysisAnderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal X Proposal Y Required investment $420,000 $420,000 Annual after-tax cash inflows 84,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 252,000 Life of project 12 years 12 years Using net present value analysis, which proposal is the more attractive?Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value. Proposal X Proposal Y Net present value Initial outflows Answer 1 Answer 2 PV of future cash flows Answer 3 Answer 4 Net present value Answer 5 Answer 6 Which proposal is more attractive?Answer 7
Net Present Value AnalysisAnderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal X Proposal Y Required investment $420,000 $420,000 Annual after-tax cash inflows 84,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 252,000 Life of project 12 years 12 years Using net present value analysis, which proposal is the more attractive?Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value. Proposal X Proposal Y Net present value Initial outflows Answer 1 Answer 2 PV of future cash flows Answer 3 Answer 4 Net present value Answer 5 Answer 6 Which proposal is more attractive?Answer 7
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow.
| Proposal X | Proposal Y | |
|---|---|---|
| Required investment | $420,000 | $420,000 |
| Annual after-tax |
84,000 | |
| After-tax cash inflows at the end of years 3, 6, 9, and 12 | 252,000 | |
| Life of project | 12 years | 12 years |
Using net present value analysis, which proposal is the more attractive?
Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value.
| Proposal X | Proposal Y | |
|---|---|---|
| Net present value | ||
| Initial outflows | Answer 1 | Answer 2 |
| PV of future |
Answer 3 | Answer 4 |
| Net present value | Answer 5 | Answer 6 |
Which proposal is more attractive?
Answer 7
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