Alfarsi Industries uses the net present value method to make investment decisions and requires a...
90.2K
Verified Solution
Link Copied!
Question
Accounting
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 $15,300 and will produce cash flows as follows:
End of Year
Investment
A
B
1
$ 8,300
$ 0
2
8,300
0
3
8,300
24,900
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:
Multiple Choice
$1,072.
$(16,372).
$9,600.
$41,272.
$-6,312.
The accounting rate of return method has two weaknesses. It ignores the time value of money, and it does not directly consider cash flows and their timing.
True/ False
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
