Question
6. Spartech Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A
6. Spartech 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 $100,000 $0
Working Capital Investment Required $0 $100,000
Annual cash Inflows $21,000 $18,000
Salvage Value of Equipment in 5 years $6,000 $8,000
Life of the Project 5 Years 5 Years
The working capital needed for Project B will be released at the end of 5 years for investment elsewhere. Spartech Industries discount rate is 12%.
Which investment alternative (if either) would you recommend that the company accept?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Stats Data And Models
Authors: Richard D. De Veaux, Paul D. Velleman, David E. Bock
4th Edition
321986490, 978-0321989970, 032198997X, 978-0321986498
