Labeau Products, Ltd., of Perth, Australia, has $19,000 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 $19,000 $19,000
- Annual cash inflows $10,000
- Single cash inflow at the end of 8 years $58,000
- Life of the project 8 years 8 years
The company's discount rate is 16%.To determine the appropriate discount factor(s) using tables, click here to view Exhibit 12B-1 and Exhibit 12B-2. Alternatively, if you calculate the discount factor using a formula, round to three (3) decimal places before using the factor in the problem.