Exercise 13-14 Comparison of Projects Using Net Present Value [LO13-2] Labeau Products, Ltd., of Perth, Australia, has...

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Exercise 13-14 Comparison of Projects Using Net Present Value[LO13-2]
Labeau Products, Ltd., of Perth, Australia, has $18,000 toinvest. The company is trying to decide between two alternativeuses for the funds as follows:
Invest in
Project X Invest in
Project Y
Investment required $ 18,000 $ 18,000
Annual cash inflows $ 7,000
Single cash inflow at the end of 6 years $ 41,000
Life of the project 6 years 6 years
The company’s discount rate is 17%.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determinethe appropriate discount factor(s) using tables.
Required:
1. Compute the net present value of Project X.
2. Compute the net present value of Project Y.
3. Which project would you recommend the company accept?

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1 Compute the net present value of Project X Answer Calculation of Net Present Value of Project X Particulars Formula used Calculation Present Value Initial investment Given in See Answer

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	Invest in Project X		Invest in Project Y
Investment required	$	18,000	$	18,000
Annual cash inflows	$	7,000
Single cash inflow at the end of 6 years			$	41,000
Life of the project	6 years		6 years