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Which project would you recommend the company accept

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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?

Reference no: EM132591113

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