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Perit Industries has $115,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows
Perit Industries has $115,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows Project A $ 115,000 $ 0 Project B $ 0 Salvage value of equipment in six years $ 21,000 $ 8,700 $ 115,000 $ 69,000 Life of the project 6 years $ 0 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 15%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 2. Compute the net present value of Project B. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 3. Which investment alternative (if either) would you recommend that the company accept? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept?
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