Perit Industries has $115,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A Project B $ 115,000 $ 0 $ 0 $115,000 $ 21,000 $ 69,000 $ 8,700 $ 0 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 15%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (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. (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 Which investment alternative (if either) would you recommend that the company accept? Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Life of Net the Internal Investment Present Project Rate Project Required Value (years) of Return $ 840,000 $398, 1898 22% $ 665,000 $297,159 13 $540,000 $188,526 8 $ 740,000 $183,344 4 21% The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. Required: 1. Compute the project profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the project profitability index for each project. (Round your answers to 2 decimal places.) Project Project Profitability Index Complete this question by entering your answers in the tabs below. Required 1 Required 2 In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate o return. Net Present Project Profitability Index Internal Rate of Return Value First preference Second preference Third preference Fourth preference
