Stellan Manufacturing Is Considering the Following Two Investment Proposals Compute the Present Value of the Future Cash Inflows from

question 57

Multiple Choice

Stellan Manufacturing is considering the following two investment proposals: $$\begin{array} { | l | l | l | } \hline & \text { Proposal } \mathbf { X } & { \text { Proposal Y } } \\\hline \text { Investment } & \$ 738,000 & \$ 508,000 \\\hline \text { Useful life } & 5 \text { years } & 4 \text { years } \\\hline \text { Estimated annual net cash inflows received } & & \\\text { at the end of each year } & \$ 152,000 & \$ 100,000 \\\hline \text { Residual value } & \$ 62,000 & \$ 0 \\\hline \text { Depreciation method } & \text { Straight-line } & \text { Straight-line } \\\hline \text { Annual discount rate } & 10 \% & 9 \% \\\hline\end{array}$$ Compute the present value of the future cash inflows from Proposal Y.
Present value of an ordinary annuity of $1:
$$\begin{array} { | c | r | r | r | } \hline & 8 \% & 9 \% & 10 \% \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 1.783 & 1.759 & 1.736 \\\hline 3 & 2.577 & 2.531 & 2.487 \\\hline 4 & 3.312 & 3.240 & 3.170 \\\hline 5 & 3.993 & 3.809 & 3.791 \\\hline 6 & 4.623 & 4.486 & 4.355 \\\hline\end{array}$$

• A) $271,018
• B) $324,000
• C) $294,640
• D) $254,000

---

Definitions:

Personal Growth

involves the pursuit of learning, development, and improvement of one's skills, knowledge, and overall character.

Collaboration

Working together in pursuit of a common cause; cooperation in a joint effort.

Underlying Differences

Fundamental or basic distinctions that are not immediately obvious but form the basis of variance between entities or issues.

Mutual Benefit

A principle or arrangement in which all parties involved gain advantages or profits.