Business
Business, 26.02.2020 05:00, lizzyhearts

A company is considering two mutually exclusive methods of producing a new product. The relevant data concerning the alternatives appear below.

Alternative I Alternative II
Initial investment $64,000 $120,000
Annual receipts $50,000 $60,000
Annual disbursements $20,000 $12,000
Annual depreciation $16,000 $20,000
Expected life 4 yrs 6 yrs
Salvage value 0 0

At the end of the useful life of whatever equipment is chosen the product will be discontinued. The company's tax rate is 50 percent and the discount rate is 10 percent. Calculate the net present value of each alternative.

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Answers: 1

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