Perit Industries has $180,000 to invest. The company is trying to decide between two alternative uses...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Perit Industries has $180,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years. Life of the project Project A $ 180,000 Project B $ 0 $ 0 $ 32,000 $ 9,300 $ 180,000 $ 54,000 6 years $ 0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%, Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend that the company accept? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? Perit Industries has $180,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years. Life of the project Project A $ 180,000 Project B $ 0 $ 0 $ 32,000 $ 9,300 $ 180,000 $ 54,000 6 years $ 0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%, Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend that the company accept? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept?
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Suppose that a 7% semi-annual coupon bond with a time to maturity of 8 years and a par value of $100 has a price of $106,4. This bond is first callable in 6 years at a redemption price of $104,8....
-
You are a summer intern in the IT department at Game Technology. You report to the IT director, Mike McGee. Mike assigned you to work with two systems analysts: Lauren Jacksina and Cathy Ross. Lauren...
-
Search an Internet search engine for neural network fraud. Answer the following questions: a. What is a neural network? b. How can neural networks be used to detect fraud? c. Which industries will...
-
Which two methods of capital investment analysis can be described as present value methods?
-
New Tech Corporation is a rapidly growing biotech company that has a required rate of return of 8%. It plans to build a new facility in Santa Clara County. The building will take 2 years to complete....
-
Filer Manufacturing has 7 , 7 3 7 , 2 8 0 shares of common stock outstanding. The current share price is $ 3 8 . 9 8 , and the book value per share is $ 3 . 0 1 . Filer Manufacturing also has two...
-
For investors, credit rating agencies provide independent, easy-to-use measurements of relative credit risk. The most well-known credit rating agencies are (Check all that apply.)
-
To whom should the audit report normally be addressed?
-
Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet? a. Changes in the capital stock account are...
-
What are the purposes of management representations?
-
State what each paragraph in the standard audit report is called and the information each conveys.
-
Which client personnel normally sign the representation letter to the auditor?
-
Your company manufactures printer cases on two different injection molding machines. The M-100 has a capacity of 25 cases per hour, and the M-200 has a capacity of 40 cases per hour. Both machines...
-
Find the radius of convergence in two ways: (a) Directly by the CauchyHadamard formula in Sec. 15.2. (b) From a series of simpler terms by using Theorem 3 or Theorem 4.
-
At December 31, 2017, Eric Corporation had two notes payable outstanding (notes 1 and 2). At December 31, 2018, Eric also had two notes payable outstanding (notes 3 and 4). These notes are described...
-
Ruth Corporation had the following payroll for April: Required Prepare journal entries on April 30 to record: a. Accrual of the monthly payroll. b. Payment of the net payroll. c. Accrual of...
-
The following data are taken from Stockton Wholesale Company's May payroll: Assume that the company is subject to a two percent state unemployment tax (due to a favorable experience rating) and a 0.6...
Study smarter with the SolutionInn App