Question
Perit Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project
Perit Industries has $100,000 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 | $100,000 | $0 |
| Working capital investment required | $0 | $100,000 |
| Annual cash inflows | $21,000 | $15,750 |
| Salvage value of equipment in six years | $8,000 | $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 14%. (Ignore income taxes.) |
| Solve this problem using your financial calculator or Excel, NOT the tables in the chapter.
|
1. Calculate the NVP for project B?
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Managerial Accounting Wileyplus Blackboard Student Package
Authors: Charles E. Davis, Elizabeth Davis
3rd Edition
1119342511, 978-1119342519
