Question

Labeau Products, Ltd. of Perth. Australia, has $23,000 to invest. The company is trying to decide between two alternative using for the funds as follows: The company's discount rate is 16%. Determine the net present values (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)

Answer 1

Column1	Column2	Column3	Column4	Column5	Column6	Column7	Column8
	Now	1	2	3	4	5	6
Project X
Initial Investment	(23,000.00)	-	-	-	-	-	-
Annual Cash Flows	-	7,000.00	7,000.00	7,000.00	7,000.00	7,000.00	7,000.00
Total Cash Flows	(23,000.00)	7,000.00	7,000.00	7,000.00	7,000.00	7,000.00	7,000.00
Discount (16%)	1.000	0.862	0.743	0.641	0.552	0.476	0.410
Present Value	(23,000.00)	6,034.48	5,202.14	4,484.60	3,866.04	3,332.79	2,873.10
Net Present Value	2,793.15
Project Y
Initial Investment	(23,000.00)	-	-	-	-	-	-
Annual Cash Flows	-	-	-	-	-	-	43,000.00
Total Cash Flows	(23,000.00)	-	-	-	-	-	43,000.00
Discount (16%)	1.000	0.862	0.743	0.641	0.552	0.476	0.410
Present Value	(23,000.00)	-	-	-	-	-	17,649.02
Net Present Value	(5,350.98)