Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,900 and will produce cash flows as follows:


End of Year Investment
A B
1 $ 8,900 $ 0
2 8,900 0
3 8,900 26,700

The present value factors of $1 each year at 15% are:


1 0.8696
2 0.7561
3 0.6575

The present value of an annuity of $1 for 3 years at 15% is 2.2832

The net present value of Investment B is: