13-7

Compute the simple rate EXERCISE 13-7 Net Present Value Analysis of Two Alternatives (L013-2] Perit Industries has $100.000 to invest . The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project $100,000 $0 $21,000 $8,000 $0 $100,000 $16,000 $0 6 years E..... 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 14%. Required: Which investment alternative if either) would you recommend that the company accept? Show all computations using the net present value format. Prepare separate computations for each project. EXERCISE 13-8 Payback period and Simple Rate of Nick's Novelties Ino