Norton Manufacturing is considering the following two investment proposals
Proposal X Proposal Y
Investment $738,000 $508,000
Useful life 5 years 4 years
Estimated annual net cash inflows received at the end of each year $152,000 $100,000
Residual value $62,000 $0
Depreciation method Straight-line Straight-line
Annual discount rate 10% 9%
Compute the present value of the future cash inflows from Proposal Y.
Present value of an ordinary annuity of $1:
8% 9% 10%
1 0.926 0.917 0.909
2 1.783 1.759 1.736
3 2.577 2.531 2.487
4 3.312 3.240 3.170
5 3.993 3.809 3.791
6 4.623 4.486 4.355
A) $271,018
B) $324,000
C) $294,640
D) $254,000
B .B) Present value of future cash inflows from proposal Y:
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