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.

Question

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.

Quizplus · Accepted Answer

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Alfarsi Industries Uses the Net Present Value Method to Make