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Labeau Products, Limited, of Perth, Australia, has $16,000 to invest. The company is trying to...

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Accounting

Labeau Products, Limited, of Perth, Australia, has $16,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:

Invest in Project X Invest in Project Y
Investment required $ 16,000 $ 16,000
Annual cash inflows $ 5,000
Single cash inflow at the end of 6 years $ 35,000
Life of the project 6 years 6 years

The companys discount rate is 15%.

Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the 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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