Alfarsi Industries Uses the Net Present Value Method to Make

question 92

Multiple Choice

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,000 and will produce cash flows as follows: The present value factors of $1 each year at 15% are:
The present value of an annuity of $1 for 3 years at 15% is 2.2832
Which investment should Alfarsi choose?

• A) Only Investment A is acceptable.
• B) Only Investment B is acceptable.
• C) Both investments are acceptable, but A should be selected because it has the greater net present value.
• D) Both investments are acceptable, but B should be selected because it has the greater net present value.
• E) Neither machine is acceptable.

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