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

question 98

Multiple Choice

Stellan Manufacturing is considering the following two investment proposals: $$\begin{array} { | l | l | l | } \hline & \text { Proposal } \mathbf { X } & \text { Proposal } \mathbf { Y } \\\hline \text { Investment } & \$ 738,000 & \$ 508,000 \\\hline \text { Useful life } & 5 \text { years } & 4 \text { years } \\\hline \text { Estimated annual net cash inflows received } & & \\\text { at the end of each year } & \$ 152,000 & \$ 100,000 \\\hline \text { Residual value } & \$ 62,000 & \$ 0 \\\hline \text { Depreciation method } & \text { Straight-line } & \text { Straight-line } \\\hline \text { Annual discount rate } & 10 \% & \$ \% \\\hline\end{array}$$ 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) $271,018
• B) $324,000
• C) $294,640
• D) $254,000

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