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salmonbee1Lv1
28 Sep 2019
Perit Industries has $130,000 to invest. The company is tryingto decide between two alternative uses of the funds. Thealternatives are:
Project A Project B Cost of equipment required $ 130,000 $ 0 Working capital investmentrequired $ 0 $ 130,000 Annual cash inflows $ 21,000 $ 65,000 Salvage value of equipment insix years $ 8,100 $ 0 Life of the project 6 years 6 years
The working capital needed for project B will be released at theend of six years for investment elsewhere. Perit Industriesâdiscount rate is 17%.
Required:
1. Compute the net present value of Project A. (Enternegative values with a minus sign. Round your final answer to thenearest whole dollar amount.)
2. Compute the net present value of Project B. (Enternegative values with a minus sign. Round your final answer to thenearest whole dollar amount.)
3. Which investment alternative (if either) would you recommendthat the company accept?
Perit Industries has $130,000 to invest. The company is tryingto decide between two alternative uses of the funds. Thealternatives are:
| Project A | Project B | |||
| Cost of equipment required | $ | 130,000 | $ | 0 |
| Working capital investmentrequired | $ | 0 | $ | 130,000 |
| Annual cash inflows | $ | 21,000 | $ | 65,000 |
| Salvage value of equipment insix years | $ | 8,100 | $ | 0 |
| Life of the project | 6 years | 6 years | ||
The working capital needed for project B will be released at theend of six years for investment elsewhere. Perit Industriesâdiscount rate is 17%.
Required:
1. Compute the net present value of Project A. (Enternegative values with a minus sign. Round your final answer to thenearest whole dollar amount.)
2. Compute the net present value of Project B. (Enternegative values with a minus sign. Round your final answer to thenearest whole dollar amount.)
3. Which investment alternative (if either) would you recommendthat the company accept?
Keith LeannonLv2
28 Sep 2019
