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