Gordon Manufacturing is considering following two investment proposals
Proposal X Proposal Y
Investment $740,000 $508,000
Useful life 5 years 4 years
Estimated annual net cash inflows received at the end of each year $154,000 $92,000
Residual value $66,000 $0
Depreciation method Straight-line Straight-line
Annual discount rate 10% 9%
Compute the present value of the future cash inflows from Proposal X.
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 3.890 3.791
6 4.623 4.486 4.355
Present value of $1:
8% 9% 10%
1 0.926 0.917 0.909
2 0.857 0.842 0.826
3 0.794 0.772 0.751
4 0.735 0.708 0.683
5 0.681 0.650 0.621
6 0.630 0.596 0.564
A) $762,136
B) $668,128
C) $583,814
D) $624,800
D .D)
Present value of cash inflows from Proposal X:
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