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Question
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 $15,000 and will produce cash flows as follows:End of Investment
Year A B
| 1 | $8,000 | $0 |
| 2 | 8,000 | 0 |
| 3 | 8,000 | 24,000 |
The present value factors of $1 each year at 15% are:
1 "u00a6"u00a6"u00a6"u00a6"u00a6..0.8696
2 "u00a6"u00a6"u00a6"u00a6"u00a6. 0.7561
3 "u00a6"u00a6"u00a6"u00a6"u00a6. 0.6575
The present value of an annuity of $1for 3 years at 15% is 2.2832
The net present value of Investment B is:
A.$780.
B.$(15,780).
C.$9,000.
D.$39,797
E.$(5,918).
Answer
This answer is hidden. It contains 147 characters.
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