Nylan Manufacturing Is Considering Two Alternative Investment Proposals with the Following

question 42

Multiple Choice

Nylan Manufacturing is considering two alternative investment proposals with the following details:
$\begin{array}{|l|c|c|}\hline & \text { Proposal X } & \text { Proposal Y } \\\hline \text { Investment } & \$ 724,000 & \$ 512,000 \\\hline \text { Useful life } & 5 \text { years } & 4 \text { year: } \\\hline\text { Estimated annual net cash inflows } & \$ 164,000 & \$ 92,000 \\\hline \text { Residual value } & \$ 66,000 &\$0 \\\hline \text { Depreciation method } & \text { Straight-line } & \text { Straight-line } \\\hline \text { Discount rate } & 10 \% & 9 \%\\\hline\end{array}$

What is the total present value of future cash inflows from Proposal Y?
Present value of annuity of $1:
$$\begin{array} { | r | r | r | r | } \hline & { 8 \% } & { 9 \% } & { 10 \% } \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 1.783 & 1.759 & 1.736 \\\hline 3 & 2.577 & 2.531 & 2.487 \\\hline 4 & 3.312 & 3.24 & 3.17 \\\hline 5 & 3.993 & 3.89 & 3.791 \\\hline 6 & 4.623 & 4.486 & 4.35 \\\hline\end{array}$$

• A) $298,080
• B) $296,960
• C) $273,152
• D) $256,000

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Definitions:

Elimination

A method in mathematics used to remove variables from equations, often used in solving systems of equations.

Linear Equations

Equations of the first degree, meaning they involve only the first powers of variables, representing straight lines in two-dimensional space.

Elimination

A method in algebra used for solving systems of equations by removing variables.

Linear Equations

Equations of the first degree, meaning they involve only linear terms and have graphs that are straight lines.