Exercise 13-7 Net Present Value Analysis of Two Alternatives (LO13-2] Perit Industries has $120,000 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 $120,000 $ 22,000 $ 8,800 6 years Project B $ $120,000 $70,000 $ 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%. Click here to view Exhibit 138-1 and Exhibit 13B-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 Which investment alternative (if either) would you recommend that the company accept? EXHIBIT 13B-1 Present of St. Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0813 0.806 0.800 2 0925 0907 890 0.873 0857 0342 0826 0812 0.797 0.783 0.769 0.756 0743 0.731 0.718 0.705 0.694 0.683 0672 0 661 0.650 0640 3 0 889 0 864 0 840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0 675 0 558 0641 0624 0.609 0.593 0579 0564 0.551 0.537 0.524 0.512 4 0855 0823 0.792 0.763 0.735 0.708 0 683 0 659 0636 0.613 0 592 0 572 0552 0534 0516 0.499 0.482 0.467 0451 0437 0.423 0410 0.822 0.784 0.747 0.713 0681 0.650 0.621 0.593 0 567 0.543 0519 0.497 0.476 0.4546 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 6 7 8 9 10 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.750 0.711 0 665 0.623 0.583 0.547 0 513 0.482 0 452 0425 0.400 0.376 0.354 0333 0.314 0 206 0.279 0.263 0.249 0.235 0.722 0 210 0.731 0.677 0627 0 502 0 540 0 502 0.467 0434 0404 0.376 0351 0.327 0.305 0.285 0 266 0240 0.233 0.218 0.204 0.191 0.179 0.168 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.200 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.550 0.500 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069 0.601 0.530 0.469 0.415 03680 326 0.290 0.258 0220 0.204 0.182 0.163 0.145 0.10 0.116 0.104 0093 0 084 0.075 0.068 0.061 0.055 0.577 0.505 0.442 0388 0340 0299 0.263 0232 0205 0.181 0.160 0.141 0.125 0.111 0099 O OBB 0.078 0.069 0.062 0.055 0.049 0.044 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 0.534 0.458 0 394 0 339 0292 0252 0.21 0.18 0163 0.141 0.123 0 107 0.093 001 0071 0052 0054 0.047 0042 0.03 0.032 0.028 0.513 0.436 0 371 0317 0270 0231 0 198 0.170 0.145 0.125 0.108 0.093 0.000 0.069 0 060 0052 0045 0039 0034 0030 0026 0023 0.494 0.416 0 350 0296 0.250 0 212 010 0.153 0130 0.11 0.095 0.01 0.060 00500051 0044 0018 00320028 0024 0.021 0018 0.475 0.396 0.331 0.277 0232 0.194 0 164 0.138 0.116 0.008 0.083 0.070 0.060 0.051 0.043 0037 0031 0027 0023 0.020 0.017 0.014 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0016 0.014 0.012 0.439 0.359 0.294 0 242 0.199 0.164 0.135 0.112 0.003 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0018 0.015 0.013 0.011 0.009 0.422 0.342 0.278 02260184 015001230101 0083 0.068 0.056 0.046 0.038 00320020002200190 015 0013 0011 0000 0.007 0.406 0.326 0.262 0211 0170 0138 0 112 0091 0074 0.060 0.049 0.040 0.033 0.027 0022 0.018 0015 0012 0010 0.000 0.007 0.006 0.390 0.310 0.247 0.197 0158 0126 0102 0002 0066 0.053 0.043 0.035 0.028 0023 0 019 0015 001) 0010 0.000 0.007 0.006 0.005 0.375 0.295 0.233 0.134 0 146 0 116 0092 0074 0 059 0047 0.038 0.030 0.024 0020 0016 0013 0010 0000 0.007 0.006 0.005 0.004 18 19 20 21 23 24 28 29 30 0.361 0.281 0.220 0.172 0.135 0.106 0084 0066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0011 0000 0.007 0.006 0.005 0.004 0.003 0.347 0.268 0.207 0.161 0.125 0.098 0076 0 060 0047 0037 0029 0023 0.018 0014 0011 0000 000 0000 0005 0.004 0.003 0.002 0333 0 255 0 196 0 150 116 0000 0069 0054 0042 0033 0026 0020 0016 0012 0010 0.00 0.006 0005 0004 0.003 0.002 0.002 0.321 0243 0.185 0.141 0 107 002 0063 004 0037 002 0022 0.017 0014 0011 000 0006 0005 0004 0.003 0002 0.002 0.002 0.308 0.231 0.174 0.131 00990075 0 057 0044 0033 0026 0020 0015 0012 0009 0.007 0.005 0004 0003 0003 0.002 0.002 0.001 0.208 0 142 097 0067 0046 0032 0022 0015 0011 0008 0.005.0004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 40 EXHIBIT 13B-2 Present Value of an Annulty of $1 in Arnars11 - Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 1.BB6 1.859 1.833 18OR 1.783 1.759 1.736 1.713 1,690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1457 1.440 2.775 2.723 2673 2.624 2.577 2.531 2.487 2.444 2.402 2361 2322 2283 2246 2.210 2.174 2.140 2 106 2.074 2042 2011 1.981 1952 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 4.452 4.329 4212 4.100 3.993 3.890 3.791 3.696 3.605 2517 3433 3.352 3274 3.199 3.127 3.058 2.991 2926 2.864 2.803 2.745 2.689 5 9 7 10 5242 5.076 4917 4.767 4623 4 486 4.355 4231 4.111 3998 3 899 3.784 3685 3589 3.498 3410 3326 3.245 3.167 3092 3.020 2951 6.002 5.786 5.582 5.389 5206 5033 4868 4712 4.564 4423 4288 4160 4039 3922 3.812 3.706 3.605 3.508 3.416 3327 3242 3.161 6.733 6.463 6.210 5.971 5.747 5535 5335 5.146 4.968 4.799 4.639 4487 4 344 4 207 4.078 3.954 3.837 3.726 3.619 3518 3421 3329 ,435 .108 6.802 6.515 6.247 5.995 5.759 5 537 5328 5.132 4.946 4.772 4 607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.8:89 5.650 5.426 5 216 5 019 4833 4659 4.494 4.339 4.192 4.05.4 3.923 3.799 3.682 3.571 8.760 B 306 7887 7.499 7.139 6.805 6 495 6.207 5938 5.6.87 5.453 5234 5029 4836 4 656 4.496 4.327 4.177 4.035 3.902 3.776 3.656 9.385 8.853 8.384 7.943 7536 7.161 6814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5842 5583 5 342 5.118 4.910 4.715 4.533 4.362 4.203 4053 3.912 3.780 10.563 9.89992958745 8.244 7.786 7 367 6.982 6 628 6.302 6.002 5.724 5 468 5229 5 008 4 802 4 611 4.432 4.265 4 108 3962 3.824 11.118 10 380 9.712 9108 85598.061 7606 7.191 6811 6.462 6.142 5847 5575 5 324 5092 4876 4 675 4.489 4.315 4.153 4001 3.859 12 13 14 15 16 17 18 19 20 11.652 10 838 10.106 9.447 8.851 8.313 7.824 7.19 6.974 6 604 6.265 5.954 5668 5.405 5.162 4.938 4.730 4,536 4.357 4.189 4.033 3.887 12.166 11 274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5 222 4.990 4.775 4,575 4.391 4.219 4059 3.910 12.659 11.690 10828 10 059 9 372 3.756 8.201 7.702 7.250 6840 6.467 6.128 5 818 5 534 5.273 5033 4.812 4.608 4.419 4.243 4080 3.928 13.134 12 085 11.158 10.336 9.604 8950 8.365 7839 7 366 6 938 6.550 6.198 5.877 55845 316 5070 4843 4635 4.442 4.263 4097 3942 13.590 12.462 11.470 10 594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4657 4.460 4.279 4.110 3.954 14.029 12 821 11.764 10.336 10.017 9292 8649 B075 7562 7 102 6.687 6.312 5.973 5.665 5.284 5.127.4.891 4.675 4.476 4.292 4.121 3.963 14.451 13 163 12.042 11 061 10.2019.442 8.772 8 176 7645 7 170 6.743 6.359 6 011 5.696 5410 5.149 4.909 4.690 4 4RR 4.302 4 130 3970 14,857 13 489 12 303 11 272 10.371 9.580 8.883 8266 7718 7 230 6.792 6.399 6044 5.7235.432 5.167.4.925 4.703 4499 4311 4 137 3.976 15 247 13 799 12 550 11.469 10.529 9.707 8.985 8 348 7784 7.283 6.835 6.434 6073 5.746 5.451 5.182 4,937 4.713 4.507 4318 4.143 3.981 15.622 14.094 12.783 11.654 10.675 98239.077 8.422 7843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.5144323 4.147 3.985 26 28 29 30 40 15 983 14 375 13 003 11.826 10 8 10 9929 9.161 8 488 7 896 7372 6 906 6.491 6 118 5783 5 480 5.206 4956 4.720 4520 4320 4151 3.989 16.330 14.643 13 2 11 11 987 10 935 10.027 9237 8.548 7.943 7.409 6 935 6514 6.136 5 798 5 492 5 215 4964 4.734 4.524 4332 4154 3.990 16.663 14 898 13 406 12.137 11051 10 116 9.307 8 602 7.984 7.441 6.961 6 534 6 152 5810 5 502 5223 4970 4.739 4.528 4.335 4 157 3.992 16.984 15.141 13.591 12.278 11.158 10 198 9370 B 650 80227.470 6 983 6.551 6 166 5820 5510 5229 4.975 4.743 4.531 4337 4.159 3.994 17.292 15 372 13.765 12 409 11.258 10 274 9 427 8 694 8.055 7.496 7.003 6 566 6 177 5829 5 517 5.235 4.979 4.746 4.534 4339 4 160 3.995 19 793 17 159 15 046 13332 11925 10.757 9 779 8951 8 244 7634 7.105 6.642 6233 58715.548 5 258 4 997 4 760 4544 4347 4 166 3.999