Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $210,000 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 Project A $ 210,000 $ 0 $ 30,000 $ 9,100 Life of the project 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 15%. 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 negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would recommend that the company accept? you EXHIBIT 14B-1 Present Value of $1; 1 Periods 4% 5% 2 3 4 5 6 7% 8% 0.962 0.952 0.943 0.935 0.926 0.925 0,907 0890 0.873 0857 0.889 0,864 0.840 0.816 0.794 0.855 0.823 0.792 0.763 0.735 0822 0,784 0.747 0.713 0.681 0.790 0.746 0.705 0.666 0.630 %69 9% 10% 0.917 0.909 0842 0.826 11% 0.901 0.812 12% 0.893 0797 13% 14% 7 0.760 0.711 0665 0.623 0.583 8 0.540 9 10 11 12 13 0.601 0.530 0.469 14 0.577 0.505 0442 15 0.555 0,481 0417 16 0534 0458 0.394 17 0.513 0.436 0371 18 19 20 21 22 0.270 0.494 0,416 0.350 0.296 0.250 0.475 0.396 0331 0.277 0.232 0.456 0.377 0312 0.258 0.215 0.439 0.359 0294 0.242 0.199 0422 0.342 0.278 0.226 0.184 23 24 25 26 27 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.178 0.149 0.124 0.104 0.087 0.073 0.051 0.051 0.043 0.037 0.164 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.406 0.326 0.262 0.211 0.170 0.138 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.390 0.310 0247 0.197 0.158 0.126 0.102 0.082 0.066 0.053 0.043 0.035 0.028. 0.023 0.019 0.015 0.013 0.375 0.295 0233 0.184 0.146 0.116 0.092 0,074 0.059 0,047 0.038 0030 0.024 0.020 0.016 0.013 0010 0.361 0.281 0.220 0.172 0.135 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.0211 0.017 0.014 0.011 0.009 0347 0.268 0207 0.161 0.125 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 19% 20% 21% 22% 23% 24% 25% 0.840 0.833 0.826 0.820 0813 0.306 0.300 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0696 0683 0672 0661 0.650 0640 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516: 0.499 0.482 0.467 0451 0437 0423 0.410 0.650 0.621 0.593 0.567 0.543 0.519 0497 0.476 0.456 0.437 0419 0402 0.386 0.370 0355 0.341 0.328 0.596 0.564 0.335 0.507 0.450 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.547 0.513 0.482 0452 0.425 0.400 0.376 0354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.731 0.677 0627 0.582 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 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 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.508 0.463 0422 0386 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 0319 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 0.415 0.368 0.326 0.290 0.258 0.229 0,204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.054 0.075 0.068 0.061 0.055 0.388 0.340 0.299 0.263 0.232 0.205 0,181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 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 0.339 0292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 0.317 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.022 0.018 0.015 0.013 0.011 0.009 0.007 0.012 0.010 0.009 0.007 0.006 0010 0.008 0.007 0.006 0.005 0.009 0.007 0.006 0.005 0.004 0.007 0.006 0.005 0.004 0.003 15% 16% 17% 18% 0.885 0.877 0.870 0.862 0.855 0.847 28 29 30 401 0308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0333 0.255 0.196 0.150 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0321 0.243 0.185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0.022 0.017 0.014 0.011 0.008 0033 0.026 0.020 0.015 0.012 0.009 0.007 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.015 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears; [+] Periods 4% 5% 6% 7% 1 0.962 0.952 0.943 2 0.901 1.713 3 4 5 6 7 8 9 7.435 10 "1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 40 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7.105 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.935 0.926 0.917 0.909 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 1.8861 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2.011 1.981 1.952 3.630 3,546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 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 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 5.242 5.076 4.917 4.767 4.623 4,486 4.355 4.231 4,111 3.998 3.889 3,784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 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 6418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 9.385 8.863 8.384 7.943 7.536 7.161 6.814 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 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4315 4.153 | 4.001 3.859 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6974 6.604 6.265 5.954 5.668 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 4.576 4.391 4.219 4.059 3.910 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 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 4.657 4.460 4.279 4.110 3.954 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4476 4.292 4.121 3.963 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 14.857 13.489 12.303 11.272 10,371 9.580 8.883 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.784 7.283 6.855. 6434 6.073 5.746 5.451 5.182 4.937 4.713 4507 4.318 4.143 3.981 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 3.990 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999