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

question 141

Multiple Choice

Norton Manufacturing is considering the following two investment proposals: $$\begin{array} { | l | r | r | } \hline & \text { Proposal X } & \text { Proposal } \mathbf { Y } \\\hline \text { Investment } & \$ 732,000 & \$ 500,000 \\\hline \text { Useful life } & 5 \text { years } & 4 \text { years } \\\hline \text { Estimated annual net cash inflows received } & & \\\text { at the end of each year } & \$ 152,000 & \$ 108,000 \\\hline \text { Residual value } & \$ 60,000 & \$ 0 \\\hline \text { Depreciation method } & \text { Straight-line } & \text { Straight-line } \\\hline \text { Annual discount rate } & 10 \% & 9 \% \\\hline\end{array}$$ Compute the present value of the future cash inflows from Proposal Y.
Present value of an ordinary annuity of $1:
$$\begin{array} { | l | r | r | r | } \hline & { 8 \% } &{ 9 \% } & 10 \% \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 1.783 & 1.759 & 1.736 \\\hline 3 & 2.577 & 2.531 & 2.487 \\\hline 4 & 3.312 & 3.240 & 3.170 \\\hline 5 & 3.993 & 3.809 & 3.791 \\\hline 6 & 4.623 & 4.486 & 4.355 \\\hline\end{array}$$

• A) $266,750
• B) $349,920
• C) $290,000
• D) $250,000

---

Definitions:

Limited Liability Partnership

A type of business partnership where some or all partners have limited liabilities, meaning they are not personally responsible for the debts of the business.

Professional Partnership

A business structure where two or more professionals collaborate, sharing responsibilities, profits, and risks, typically in fields requiring a high level of training or expertise.

Negligence

The failure to take proper care in doing something, leading to damage or injury to others.

Business Plan

A formal document that outlines an organization's goals, strategies, target market, financial forecasts, and marketing plans, serving as a roadmap for business growth.