Question
Lambert Manufacturing has $120,000 to invest in either Project A or Project B. The following data are available on these projects (Ignore income taxes.): Project
Lambert Manufacturing has $120,000 to invest in either Project A or Project B. The following data are available on these projects (Ignore income taxes.):
| Project A | Project B | |||||
| Cost of equipment needed now | $ | 120,000 | $ | 70,000 | ||
| Working capital investment needed now | - | $ | 50,000 | |||
| Annual net operating cash inflows | $ | 50,000 | $ | 45,000 | ||
| Salvage value of equipment in 6 years | $ | 15,000 | - | |||
Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.
Both projects have a useful life of 6 years. At the end of 6 years, the working capital investment will be released for use elsewhere. Lambert's discount rate is 14%.
The net present value of Project A is closest to:
Step 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
Business Information Systems For Accounting Students
Authors: Martin Quinn
1st Edition
0273773526, 9780273773528
