A Company Has a Decision to Make Between Two Investment

question 67

Essay

A company has a decision to make between two investment alternatives.The company requires a 10% return on investment.Predicted data is provided below:
$\begin{array}{lrr}& \underline { \text { Investment Y } }& \underline { \text { Investment } Z }\\\text { Projected after-tax net income } & \$ 40,000 & \$ 42,000 \\\text { Investment costs } & \$ 600,000 & \$ 675,000 \\\text { Estimated life } & 6 \text { years } & 6 \text { years }\end{array}$ The present value of an annuity for six years at 10% is 4.3553.This company uses straight-line depreciation.
Required:
a.Calculate the net present value for each investment.
b.Which investment should this company select? Explain.

---

Definitions:

Characteristics Of Effective Feedback

Attributes of feedback that positively influence understanding, acceptance, and improvement, such as being specific, timely, and constructive.

Descriptive

Relating to the detailed or factual presentation of something.

Documented

Information or data that has been recorded, written down, or otherwise stored for the purpose of evidence or reference.

Specific

Clearly defined or identified; precise or particular.