A company has a decision to make between two investment alternatives. The company requires a 10% return on investment. Predicted data is provided below:
Investment A Investment Z
Projected after-tax net income $ 40,000 $ 42,000
Investment costs $600,000 $675,000
Estimated life 6 years 6 years
The present value of an annuity for 6 years at 10% is 4.3553. This company uses straight-line depreciation.
Required:
(a) Calculate the net present value for each investment.
(b) Which investment should this company select? Explain.

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The Answer of A company has a decision to make between two investment alternatives. The company requires a 10% return on investment. Predicted data is provided below:
Investment A Investment Z
Projected after-tax net income $ 40,000 $ 42,000
Investment costs $600,000 $675,000
Estimated life 6 years 6 years
The present value of an annuity for 6 years at 10% is 4.3553. This company uses straight-line depreciation.
Required:
(a) Calculate the net present value for each investment.
(b) Which investment should this company select? Explain.

A Company Has a Decision to Make Between Two Investment