Reference no: EM132591113
Labeau Products, Ltd., of Perth, Australia, has $20,000 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 $20,000 $20,000
Annual cash inflows$6,000
Single cash inflow at the end of 6 years $40,000
Life of the project 6 years 6 years
The company's discount rate is 15%.
Required:
Question 1. Compute the net present value of Project X.
Question 2. Compute the net present value of Project Y.
Question 3. Which project would you recommend the company accept?