Perit Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:

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%.

Required: Which investment alternative (if either) would you recommend that the company accept? Show all computations using the net present value format. Prepare separate computations for each project.

Project B Cost of equipment required Working capital investment required Annual cash inflows ..... Salvage value of equipment in six years Life of the project Project A $100,000 $0 $21,000 $8,000 6 years $0 $100,000 $16,000 $0 6 years