A Company Has a Decision to Make Between Two Investment

question 69

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:
$$\begin{array} { l rr } &\underline{\text { Investment Y}} & \underline{\text { Investment Z}} \\\text {Projected after-tax net income}&\$ 40,000&\$ 42,000\\\text {Investment costs}&\$ 600,000&\$ 675,000\\\text {Estimated life}&6 \text { years }&6 \text { years }\end{array}$$
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.

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Definitions:

pH

A scale used to specify the acidity or basicity of an aqueous solution, with values ranging from 0 (highly acidic) to 14 (highly basic) and 7 being neutral.

Hydrochloric Acid

Hydrochloric Acid is a strong, corrosive acid found in the stomach that aids in digestion by breaking down food and killing pathogens.

Sodium Hydroxide

A highly caustic metallic base and alkali salt, commonly used in industrial processes and as a drain cleaner.

Buffer

A substance in a solution that tends to lessen the change in hydrogen ion concentration (pH) that otherwise would be produced by adding an acid or base.