Assignment
Nylan Manufacturing is considering two alternative investment proposals with the following details:
|
Proposal X
|
Proposal Y
|
|
Investment
|
$720,000
|
$500,000
|
|
Useful life
|
5 years
|
4 years
|
|
Estimated annual net cash inflows
|
$150,000
|
$90,000
|
|
Residual value
|
$50,000
|
$0
|
|
Depreciation method
|
Straightminus-line
|
Straightminus-line
|
|
Discount rate
|
10%
|
9%
|
What is the total present value of future cash inflows from Proposal Y?
|
8%
|
9%
|
10%
|
|
1
|
0.926
|
$0.92
|
0.909
|
|
2
|
1.783
|
1.759
|
1.736
|
|
3
|
2.577
|
2.531
|
2.487
|
|
4
|
3.312
|
3.24
|
3.17
|
|
5
|
3.993
|
3.89
|
3.791
|
|
6
|
4.623
|
4.486
|
4.355
|
A. $291,600
B. $250,000
C. $266,750
D. $290,000