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Multi-Task Corporation is considering whether to invest $125,000 in Project A or Project B. The following information is available for both projects: Project A Project

Multi-Task Corporation is considering whether to invest $125,000 in Project A or Project B. The following information is available for both projects: Project A Project B Cost of equipment needed today $125,000 Working capital requirement $125,000 Annual cash operating inflows $22,000 $30,000 Salvage value in 5 years $12,500 Multi-Task Corporation requires a rate of return of 14% on its capital projects. Both projects will last 5 years. If Multi-Task Corporation selects Project A, the working capital investment will be released at the end of the 5-year period. Required: Calculate the net present value of each project. (6 marks) Which project would you pick based on your net present value calculations? (2 marks) Calculate the profitability index for Projects A and B.

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