Net Present Value Analysis Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal X Proposal Y Required investment $300,000 $300,000 Annual after-tax cash inflows 60,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 180,000 Life of project 12 years 12 years Using net present value analysis, which proposal is the more attractive?
Net Present Value Analysis Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal X Proposal Y Required investment $300,000 $300,000 Annual after-tax cash inflows 60,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 180,000 Life of project 12 years 12 years Using net present value analysis, which proposal is the more attractive?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 4PA: Net present value method, internal rate of return method, and analysis for a service company The...
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Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow.
| Proposal X | Proposal Y | |
|---|---|---|
| Required investment | $300,000 | $300,000 |
| Annual after-tax |
60,000 | |
| After-tax cash inflows at the end of years 3, 6, 9, and 12 | 180,000 | |
| Life of project | 12 years | 12 years |
Using net present value analysis, which proposal is the more attractive?
Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value.
| Proposal X | Proposal Y | |
|---|---|---|
| Net present value | ||
| Initial outflows | Answer
|
Answer
|
| PV of future cash flows | Answer
|
Answer
|
| Net present value | Answer
|
Answer
|
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