4/30/2018
ACT 222, HM CH 12 – Score 27.67 1 out of 30 points(92.23 award 6 out of 6 points Labeau Products Ltd of Perth Australia has $35,000 t…
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ACT 222, HM CH 12 – Score 27.67 1 out of 30 points(92.23...
Home 쇴Cleveland State 쇴ACT 쇴ACT 222 쇴ACT 222, HM CH 12
SCHOOL
Cleveland State
COURSE TITLE
ACT 222
TYPE
Notes
UPLOADED BY
zahrah
PAGES
12
RATINGS
싙 95% (61)
Score: 27.67 out of 30 points (92.23%)
1. award:
6 out of
6 points
Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying
two alternative uses for the funds as follows: (Ignore income taxes.)
Invest in
Project X
Invest in
Project Y
Investment required $35,000 $35,000
Annual cash inflows $9,000
Single cash inflow at the end of 10 years $150,000
Life of the project 10 years 10 years
The company’s discount rate is 18%.
To determine the appropriate discount factor(s) using tables, click here to view Exhibit 12B
Alternatively, if you calculate the discount factor(s) using a formula, round to three (3) de
using the factor in the problem.
Required:
(1) Determine the net present value. (Round your answer to the nearest dollar
amount should be indicated by a minus sign. Omit the “$” sign in your respons
Net Present
Value
Project X $5,446
Project Y $-6,360
(2) Which investment would you recommend that the company accept?
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4/30/2018
ACT 222, HM CH 12 – Score 27.67 1 out of 30 points(92.23 award 6 out of 6 points Labeau Products Ltd of Perth Australia has $35,000 t…
https://www.coursehero.com/file/7354905/ACT-222-HM-CH-12/ 2/12
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Project X
Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying
two alternative uses for the funds as follows: (Ignore income taxes.)
Invest in
Project X
Invest in
Project Y
Investment required $35,000 $35,000
Annual cash inflows $9,000
Single cash inflow at the end of 10 years $150,000
Life of the project 10 years 10 years
The company’s discount rate is 18%.
4/30/2018
ACT 222, HM CH 12 – Score 27.67 1 out of 30 points(92.23 award 6 out of 6 points Labeau Products Ltd of Perth Australia has $35,000 t…
https://www.coursehero.com/file/7354905/ACT-222-HM-CH-12/ 3/12
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2.
award:
6 out of
6 points
To determine the appropriate discount factor(s) using tables, click here to view Exhibit 12B
Alternatively, if you calculate the discount factor(s) using a formula, round to three (3) de
using the factor in the problem.
Required:
(1) Determine the net present value. (Round your answer to the nearest dollar
amount should be indicated by a minus sign. Omit the “$” sign in your respons
Net Present
Value
Project X $ 5,446 ± 1
Project Y
$
-6,350 ± .2%
(2) Which investment would you recommend that the company accept?
Project X
Explanation:
(1)
Item Year(s)
Amount of
Cash Flows
18%
Factor
Present
Value of
Cash Flows
Project X:
Initial investment Now $(35,000) 1.000 $(35,000
Annual cash inflow 1-10 $9,000 4.494 40,446
Net present value $5,446
Project Y:
Initial investment Now $(35,000) 1.000 $(35,000
Single Cash inflow 10 $150,000 0.191 28,650
Net present value $(6,350
(2)
Project X should be selected. Project Y does not provide the required 18% return, as sho
net present value.
Perit Industries has $100,000 to invest. The company is trying to decide between two alte
funds. The alternatives are:
Project A Project B
Cost of equipment required $100 000 $0
4/30/2018
ACT 222, HM CH 12 – Score 27.67 1 out of 30 points(92.23 award 6 out of 6 points Labeau Products Ltd of Perth Australia has $35,000 t…
Cost of equipment required $100,000 $0
Working capital investment required $0 $100,000
Annual cash inflows $21,000 $16,000
Salvage value of equipment in six years $8,000 $0
