Perrot Industries has $265,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow:

The working capital needed for project B will be released at the end of six years for investment elsewhere. Perrot Industries? discount rate is 14%.

Required:

Which investment alternative (if either) would you recommend that the company accept? Show all computations using the NPV method. Prepare a separate computation for each project.

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Project A. Cost of equipment required..... Working capital investment required.. Annual cash inflows .... Salvage value of equipment in six years . Life of the project . $325,000 $325,000 54,400 67,650 21,200 6 years 6 years