Answered step by step
Verified Expert Solution
Question
1 Approved Answer
I will leave a thumbs up, thank you for the help! Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives (LO14-2] Perit Industries has
I will leave a thumbs up, thank you for the help!
Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives (LO14-2] Perit Industries has $130,000 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 Project B $ 130,000 $ 0 $ 0 $ 130,000 $ 22,000 $ 33,000 $ 8,300 $ 0 6 years 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 14B-1 and Exhibit 14B-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. 2. Net present value project A Net present value project B Which investment alternative (if either) would you recommend that the company accept? 3. Project B EXHIBIT 14B-1 Present Value of $1:1 (1+r)" Periods 1 2 3 4 5 0.451 6 7 8 9 10 11 12 13 14 15 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 0.820 0.813 0.806 0.800 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.889 0.864 0.840 0.816 0.794 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 0.855 0.823 0.792 0.763 0.735 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 0.437 0.423 0.410 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.593 0.567 0.567 0.543 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.386 0.370 0.355 0.341 0.328 0.790 0.746 0.705 0.666 0.630 0.596 0.564 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 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.235 0.222 0.222 0.210 0.731 0.677 0.627 0.582 0.540 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 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.333 0.308 0.284 0.263 0.284 0.263 0.243 0.225 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 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 0.527 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 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 0.084 0.075 0.068 0.061 0.055 0.577 0.505 0.442 0.388 0.340 0.299 0.263 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 0.555 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 0.292 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 0.513 0.436 0.371 0.317 0.270 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 0.039 0.034 0.030 0.026 0.023 0.494 0.416 0.350 0.296 0.250 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 0.024 0.021 0.018 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.456 0.377 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.061 0.051 0.051 0.043 0.043 0.037 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.439 0.359 0.294 0.242 0.199 0.164 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.422 0.342 0.278 0.226 0.184 0.150 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 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 0.012 0.010 0.009 0.009 0.007 0.007 0.006 0.390 0.310 0.247 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 0.010 0.008 0.007 0.006 0.005 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.009 0.007 0.006 0.005 0.004 0.361 0.281 0.220 0.172 0.135 0.106 0.084 0.066 0.053 0.042 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.006 0.005 0.004 0.003 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.333 0.255 0.196 0.150 0.090 0.069 0.054 0.042 0.03 0.026 0.020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.321 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 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 16 17 18 19 20 21 22 23 0.123 24 25 26 27 28 29 0.116 30 40 1 EXHIBIT 14B-2 Present Value of an Annulty of $1 In Arrears; Periods 1 2 3 4 5 6 8 9 0 1 7 3 14 5 4% 5% 6% 7% 8% 9% 10% 1% 128 % 4% 5% 16% 7 % 19% 20% 21% 22% 23% 248 25% 0.962 0.952 0.943 0.935 0926 097 0909 0901 0.893 0.885 0.87 0.870 0.862 0.855 0847 0.840 0833 0826 0820 0.813 0.806 0.800 1.886 159 133 1.808 1.73 1759 136 17 1690 1.568 1.647 1.626 1.605 1585 1.566 1.547 1528 1509 1.492 1.474 1.457 1.440 2.75 2.723 2.63 2.624 25] 2531 2.48] 2.444 2.402 2361 2.322 2.283 2246 2.246 2.210 274 2.140 2106 2.074 2.042 2.0 1.9 1.952 3.630 3.546 3.465 3.387 3.32 3.240 3.70 3.102 3.037 2974 2014 285 2.798 2.743 2.60 2.639 2.59 2540 2.494 2.448 2.404 2.362 4.452 4.329 44.212 4.100 3.93 3.90 3.71 3.696 3.605 3.57 3.433 3.352 3.274 3199 3.127 3.058 299 2926 2864 2.803 2.745 2.689 5.242 5076 4917 4.767 4.623 4.486 4.355 4.231 4 398 3.89 3.784 3.685 3.589 3.589 3.498 3.410 3326 3245 3167 3.092 3.020 2951 6.002 5.786 5.582 5.389 5.206 5.033 4.868 472 4564 4423 4288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.32] 3.242 3.161 6.733 6.468 6.210 5.97] 5.747 5535 5.335 5.146 4.968 4799 4.639 44.487 4.344 4.207 4.078 3.954 3.37 3.26 3.519 3.518 3.421 3.329 7435 7108 6.802 6.55 6.247 5.995 5.759 55375328 532 4.946 4.72 4.607 4.451 4303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 8.1 7722 7.360 7.024 6.70 6.418 6.145 5.89 5.650 5.426 5.216 5.019 4.33 4.659 4.494 48 4192 4054 3.923 3.799 3.682 3571 8.760 8306 7887 7.499 7139 6.805 6.495 6.207 58 5.687 5.453 5.234 5.029 4.36 4.656 4.486 4327 477 4.035 3.902 3.76 3.656 9.385 8.863 8.384 7943 7536 7161 6.844 6.492 6194 5.918 5.660 5.421 5197 4.98 4793 4.5m 4.439 4.278 4.27 3995 3851 3.25 9.986 9.394 8853 8.358 7904 7.487 7103 6.750 6.424 622 5.842 5583 5342 58 4.910 475 4.533 4.362 4.203 4.053 4.0533.912 3.780 10.563 9.899 9.295 8.745 8.244 7786 7.36] 6.982 6.628 6.302 6.002 5.724 5.468 5.468 5.229 5.008 4.802 4.5m 4.432 4.265 4108 3.962 3.824 118 103092 9108 8.559 8.06] 7.606 I199 6.8 6.462 6142 5847 5.575 5.324 5.092 4.876 4.675 4.489 4315 453 4.000 3.859 1.652 10.838 10106 9.47 8.851 8313 7824 7379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4730 4536 4357 49 4.033 3.87 2.166 11.274 10.47 9763 9.22 8.544 8.0227549 7120 6.729 6.373 6.047 5.749 5.475 5.222 4990 4775 4.576 4391 44.219 4.059 3.910 12.69 1.690 10.828 10.059 9.372 8.756 8.201 7702 7.250 6.840 6.467 6128 5.818 5.534 5273 5033 4.812 4.608 4.49 4.243 4.080 3.28 14 2085 11.158 10336 9.604 8.950 8.365 7.839 7.366 6.988 6.550 6.198 5.87 5.584 5.36 5.070 4.43 4.635 4.442 4.26. 4.097 3.942 50 2462 11.470 10.594 9.818 979 854 7963 7469 7.025 6.623 6.259 5.929 5.628 5.628 5.353 5101 4.870 4.657 4.460 4279 4.10 3.954 14.029 2821 1.764 10.86 0.07 10.07 9.292 8.649 8.0757562 7102 6.687 6.312 5.973 5.665 5.384 5.127 4.91 4.675 4.476 4.292 41 3.963 14.451 13.163 2.042 1.061 10.20 9.442 88.T2 876 7.645 170 6.743 6359 6.00 5.696 5.410 5.19 4.909 4.690 4.488 4.302 4.0 3.970 14.857 3.489 12.303 2.303 1272 10371 9.580 8.83 8266 7718 7.230 6.792 6.39 6.04 5.723 5.4325167 4.925 473 4.499 4.311 47 3.976 5.247 3.799 2.550 11.469 10.529 9.707 8.985 8.348 7784 7.288 6.835 6.434 6.073 6.073 5.7% 5.746 5.451 582 4.937 473 4.507 4.318 4.43 3.98] 5.622 14.094 2.783 11.654 10.675 9.823 9.07 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.766 5.46] 595 4.948 4721 4514 4.323 4.147 3.985 5.93 14.375 13.003 1.826 10.810 9.929 9161 8.488 1896 1372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4520 4.328 4.151 3988 6.330 4.643 13.21 11987 10.935 10.027 9237 8548 7943 7409 6.935 6.54 6136 5.798 5.492 525 4964 4734 4.524 4332 4.154 3.990 16.663 14.898 3.406 3.406 12.137 11.051 10.16 9.307 8.602 7.984 7441 6.961 6.534 652 5.810 5.5025.223 4.970 439 4.528 4.335 457 3.992 | 16.984 15.141 13.51 2278 11.158 10.198 9.370 8.650 8.022 7470 6.983 6.551 6.166 5.820 5.50 5.229 4.975 4743 4531 4.337 4.159 3.94 7292 15.372 765 2409 1258 0274 9.42] 8.694 8.055 7.496 2003 6.566 6 5.829 5.57 5235 5.235 4.979 4.746 4.534 4.339 4.160 3.995 19793 17159 15.046 3.332 1.925 10.75] 9.79 8.951 8.244 7.634 7.105 6.642 6233 5.871 5.548 5.258 4.997 4.760 4.54 4.347 4.347 4166 3.999 16 7 9 20 21 2 3 24 5 25 27 30 40Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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