Simms Manufacturing is considering two alternative investment proposals with the following data:
$$\begin{array} { | l | l | l | }
\hline & \text { Proposal X } & \text { Proposal Y } \
\hline \text { Investment } & \$ 620,000 & \$ 400,000 \
\hline \text { Useful life } & 8 \text { years } & 8 \text { years } \
\hline \begin{array} { l }
\text { Estimated annual net } \
\text { cash inflows for 8 years }
\end{array} & \$ 130,000 & \$ 80,000 \
\hline \text { Residual value } & & \
\hline \text { Depreciation method } & \$ 60,000 & \$ 0 \
\hline \text { Required rate of return } & \text { Straight-line } & \text { Straight-line } \
\hline
\end{array}$$ What is the total present value of future cash inflows from Proposal Y?
Note: Present value and future value tables are needed.

Question

Simms Manufacturing is considering two alternative investment proposals with the following data:
$$\begin{array} { | l | l | l | } 
\hline & \text { Proposal X } & \text { Proposal Y } \
\hline \text { Investment } & \$ 620,000 & \$ 400,000 \
\hline \text { Useful life } & 8 \text { years } & 8 \text { years } \
\hline \begin{array} { l } 
\text { Estimated annual net } \
\text { cash inflows for 8 years }
\end{array} & \$ 130,000 & \$ 80,000 \
\hline \text { Residual value } & & \
\hline \text { Depreciation method } & \$ 60,000 & \$ 0 \
\hline \text { Required rate of return } & \text { Straight-line } & \text { Straight-line } \
\hline
\end{array}$$ What is the total present value of future cash inflows from Proposal Y?
Note: Present value and future value tables are needed.

Quizplus · Accepted Answer

To calculate the total present value of future cash inflows from Proposal Y, we need to use the present value of an annuity formula, as the cash inflows are the same each year. However, without the specific rate from the required rate of return and the present value factor from the tables, we cannot calculate the exact present value. The correct answer choice is based on the information provided, which is insufficient for a detailed calculation. Therefore, the selection of choice B is based on an assumption or error, as the exact calculation cannot be completed with the given data.

Simms Manufacturing Is Considering Two Alternative Investment Proposals with the Following