Question
JJ Industries has $150,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project
JJ Industries has $150,000 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 $ 150,000 $ 0 Working capital investment required $ 0 $ 150,000 Annual cash inflows $ 24,000 $ 37,000 Salvage value of equipment in six years $ 8,500 $ 0 Life of the project 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 15%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative value 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 value 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?
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