Alfarsi Industries uses the net present value method to make investment decisions and requires a...
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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 $15,100 and will produce cash flows as follows:
| End of Year | Investment | |
| A | B | |
| 1 | $8,100 | $0 |
| 2 | 8,100 | 0 |
| 3 | 8,100 | 24,300 |
| 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: |
$877.
$(15,977).
$9,200.
$3,394.
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