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Perit Industries has $110,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project
Perit Industries has $110,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B $0 $0$110,000 $28,000 $0 6 years $110,000 Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project $20,000 $8,100 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Pent Industries' discount rate is 15% Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables Required: a. Calculate net present value for each project ProjectA Project E Net present value b. Which investment alternative (if either) would you recommend that the company accept? Project B Project A
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