Question
MapleTree Industries has $ 265,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follows Project A
MapleTree Industries has $ 265,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follows
Project A Project B
Cost of equipment required $265,000
Working capital investment required $265,000
Annual Cash inflow $55,650 $42,400
Residue value of equipment in 6 years $21,200
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. Candisc Industries's interest rate is 14%
Required:
Which Investment option would you recommend the company to accept? Please show separate calculations and formulas for each project using the NPV method.
( Please show me in your answers which of the formula you use for your calculation and no financial calculator or Excel calculation sheet to be used)
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
13th Edition
978-0073379616, 73379611, 978-0697789938
