Alfarsi industries uses the net present value method

Reference no: EM131022242

35] 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 $14,200 and will produce cash flows as follows:

End ofYear	Investment
End ofYear	A	B
1	$9,800	$0
2	9,800	0
3	9,800	29,400

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:

$5,131.

$(19,331).

$15,200.

$8,175.

Reference no: EM131022242

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