Perit Industries has $120,000 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	$ 120,000		$ 0
Working capital investment required	$ 0		$ 120,000
Annual cash inflows	$ 22,000		$ 70,000
Salvage value of equipment in six years	$ 8,800		$ 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%.

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. (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?

EXHIBIT 14B-1 Present Value of $1;1(1+r)n 8% 23% 0.813 Periods 1 2 3 9% 0.917 0.842 0.772 0.708 0.650 0.596 ! HE 4 T 1. TH 5 6 7 8 0.547 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 EL 22% 0.820 0.672 0.551 0.451 0.370 0.303 0.249 0.204 0.167 0.137 0.112 0.092 0.075 0.062 9 10 11 12 13 14 AH 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.S 0.534 0.513 0.494 0.475 0.456 0.439 0.422 0.406 0.390 0.375 0.361 0.347 0.333 0.321 0.308 0.208 5% 6% 0.952 0.943 0.907 0.890 0.864 0.840 0.823 0.792 0.784 0.747 0.746 0.705 0.711 0.665 0.677 0.627 0.645 0.592 0.614 0.558 0.585 0.527 0.557 0.497 0.530 0.469 0.505 0.442 0.481 0.417 0.458 0.394 0.436 0.371 0.416 0.350 0.396 0.331 0.377 0.312 0.359 0.294 0.342 0.278 0.326 0.262 0.310 0.247 0.295 0.233 0.281 0.220 0.268 0.207 0.255 0.196 0.243 0.185 0.231 0.174 0.142 0.097 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 0.339 0.317 0.296 0.277 0.258 0.242 0.226 0.211 0.197 0.184 0.172 0.161 0.150 0.141 0.131 0.067 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215 0.199 0.184 0.170 0.158 0.146 0.135 0.125 0.116 0.107 oluola 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 0.112 0.101 0.091 0.082 0.074 0.066 0.060 0.054 0.048 0.044 0.015 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 0.164 0.150 0.138 0.126 0.116 0.106 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.093 0.083 0.074 0.066 0.059 0.053 0.047 0.042 0.037 0.033 0.011 13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087 0.077 0.068 0.060 0.053 0.047 0.042 0.037 0.033 0.029 0.026 0.008 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 0.064 0.056 0.049 0.043 0.038 0.033 0.029 0.026 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 0.107 0.093 0.081 0.070 0.061 0.053 0.046 0.040 0.035 0.030 0.026 0.023 0.020 0.017 0.015 0.004 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 0.195 0.168 0.145 0.125 0.108 0.093 0.080 0.069 0.060 0.051 0.044 0.038 0.033 0.028 0.024 0.021 0.018 0.016 0.014 0.012 0.003 17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043 0.037 0.032 0.027 0.023 0.020 0.017 0.014 0.012 0.011 0.009 0.002 18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.011 0.010 0.008 0.007 0.001 19% 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.074 0.062 0.052 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.008 0.006 0.005 0.001 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 0.022 0.018 0.015 0.013 0.010 0.009 0.007 0.006 0.005 0.004 0.001 21% 0.826 0.683 0.564 0.467 0.386 0.319 0.263 0.218 0.180 0.149 0.123 0.102 0.084 0.069 0.05 0.047 0.039 0.032 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0.005 0.004 0.003 0.000 24% 0.806 0.650 0.524 0.423 0.341 0.275 0.222 0.179 0.144 0.116 0.094 0.076 0.061 0.049 0.040 0.032 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.000 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 25% 0.800 0.640 0.512 0.410 0.328 0.262 0.210 0.168 0.134 0.107 0.086 0.069 0.055 0.044 035 0.028 0.023 0.018 0.014 0.012 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.001 0.000 0.661 0.537 0.437 0.355 0.289 0.235 0.191 0.155 0.126 0.103 0.083 0.068 0.055 0.045 0.036 0.030 0.024 0.020 0.016 0.013 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.002 0.000 0.218 0.198 0.180 0.164 0.149 0.135 0.123 0.112 0.102 0.092 0.084 0.076 0.069 0.063 0.057 0.022 0.042 0.034 0.028 0.023 0.019 0.015 0.013 0.010 0.008 0.007 0.006 0.005 0.098 0.022 0.090 0.082 0.075 0.032 0.004 0.003 0.003 0.000 0.099 0.046 0.020 0.005 EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears; 1 r [1-1(1+r)n] Periods 1 2 3 DI AH 4 5 6 7 TI - 8 9 LLLL 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 4% 5% 6% 7% 8% 9% 10% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 1.886 1.859 1.833 1.808 1.783 1.759 1.736 2.775 2.723 2.673 2.624 2.577 2.531 2.487 3.630 3.546 3.465 3.387 3.312 3.240 3.170 4.452 4.329 4.212 4.100 3.993 3.890 3.791 5.242 5.076 4.917 4.767 4.623 4.486 4.355 6.002 5.786 5.582 5.389 5.206 5.033 4.868 6.733 6.463 6.210 5.971 5.747 5.535 5.335 7.435 7.108 6.802 6.515 6.247 5.995 5.759 8.111 7.722 7.360 7.024 6.710 6.418 6.145 8.760 8.306 7.887 7.499 7.139 6.805 6.495 9.385 8.863 8.384 7.943 7.536 7.161 6.814 9.986 9.394 8.853 8.358 7.904 7.487 7.103 10.563 9.899 9.295 8.745 8.244 7.786 7.367 11.118 | 10.380 9.712 9.108 8.559 8.061 7.606 11.652 10.838 10.106 9.447 8.851 8.313 7.824 12.166 | 11.274 10.477 9.763 9.122 8.544 8.022 12.659 11.690 10.828 10.059 9.372 8.756 8.201 13.134 | 12.085 11.158 10.336 9.604 8.950 8.365 13.590 | 12.462 | 11.470 10.594 | 9.818 9.129 8.514 14.029 12.821 | 11.764 10.836 10.017] 9.292 8.649 14.451 | 13.163 | 12.042 11.061 10.2019.442 8.772 14.857 13.489 12.303 | 11.272 10.371 9.580 8.883 15.247 13.799 12.550 11.469 10.529 9.707 8.985 15.622 14.094 | 12.783 11.654 10.675 9.823 9.077 15.983 | 14.375 13.003 11.826 10.810 | 9.929 9.161 16.330 | 14.643 13.211 11.987 10.935 | 10.027 9.237 16.663 14.898 13.406 12.137 11.051 10.116 9.307 16.984 15.141 13.591 | 12.278 11.158 10.1989.370 17.292 | 15.372 13.765 12.409 11.258 10.274 9.427 19.793 17.159 | 15.046 | 13.332 11.925 10.757 9.779 11 % 12% 0.901 0.893 1.713 1.690 2.444 2.402 3.102 3.037 3.696 3.605 4.231 4.111 4.712 4.564 5.146 4.968 5.537 5.328 5.889 5.650 6.207 5.938 6.492 6.194 6.750 6.424 6.982 6.628 7.191 6.811 7.379 6.974 7.5497.120 7.702 7.250 7.8397.366 7.963 7.469 8.075 7.562 8.176 7.645 8.266 7.718 8.348 7.784 8.422 7.843 8.488 7.896 8.548 7.943 8.602 7.984 8.650 8.022 8.694 8.055 8.951 8.244 13% 14% 0.885 0.877 1.668 1.647 2.361 2.322 2.974 2.914 3.517 3.433 3.998 3.889 4.423 4.288 4.799 4.639 5.132 4.946 5.426 5.216 5.687 5.453 5.918 5.660 6.122 5.842 6.302 6.002 6.462 6.142 6.604 6.265 6.729 6.373 6.840 6.467 6.938 6.550 7.025 6.623 7.102 6.687 7.170 6.743 7.230 6.792 7.283 6.835 7.330 6.873 7.372 6.906 7.409 6.935 7.441 6.961 7.470 6.983 7.496 7.003 7.634 7.105 15% 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 5.847 5.954 6.047 6.128 6.198 6.259 6.312 6.359 6.399 6.434 6.464 6.491 6.514 6.534 6.551 6.566 6.642 16% 17% 18% 19% 0.862 0.855 0.847 0.840 1.605 1.585 1.566 1.547 2.246 2.210 2.174 2.140 2.798 2.743 2.690 2.639 3.274 3.199 3.127 3.058 3.685 3.589 3.498 3.410 4.039 3.922 3.812 3.706 4.344 4.207 4.078 3.954 4.607 4.451 4.303 4.163 4.833 4.659 4.494 4.339 5.029 4.836 4.656 4.486 5.197 4.988 4.793 4.611 5.342 5.118 4.910 4.715 5.468 5.229 5.008 4.802 5.575 5.324 5.092 4.876 5.668 5.405 5.162 4.938 5.749 5.475 5.222 4.990 5.818 5.534 5.273 5.033 5.8775.584 5.316 5.070 5.929 5.628 5.353 5.101 5.973 5.665 5.384 5.127 6.011 5.696 5.410 5.149 6.044 5.723 5.432 5.167 6.073 5.746 5.451 5.182 6.097 5.766 5.467 5.195 6.118 5.783 5.480 5.206 6.136 5.798 5.492 5.215 6.152 5.810 5.502 5.223 6.166 5.820 5.510 5.229 6.177 5.829 5.517 5.235 6.233 5.871 | 5.548 5.258 20% 21 % 22% 23% 0.833 0.826 0.820 0.813 1.528 1.509 1.492 1.474 2.106 2.074 2.042 2.011 2.589 2.540 2.494 2.448 2.991 2.926 2.864 2.803 3.326 3.245 3.167 3.092 3.605 3.508 3.416 3.327 3.837 3.726 3.619 3.518 4.031 3.905 3.786 3.673 4.192 4.054 3.923 3.799 4.327 4.177 4.035 3.902 4.439 4.278 4.127 3.985 4.533 4.362 4.203 4.053 4.611 4.432 4.265 4.108 4.675 4.489 4.315 4.153 4.730 4.536 4.357 4.189 4.775 4.5764.391 4.219 4.812 4.608 4.419 4.243 4.843 4.635 4.442 4.263 4.870 4.657 4.460 4.279 4.891 4.675 4.476 4.292 4.909 4.690 4.488 4.302 4.925 4.703 4.499 4.311 4.937 4.713 4.507 4.318 4.948 4.721 4.514 4.323 4.956 4.728 4.520 4.328 4.964 4.734 4.524 4.332 4.970 4.739 4.528 4.335 4.975 4.743 4.531 4.337 4.979 4.746 4.534 4.339 4.997 4.760 4.544 4.347 24% 25% 0.806 0.800 1.457 1.440 1.981 1.952 2.404 2.362 2.745 2.689 3.020 2.951 3.242 3.161 3.421 3.329 3.566 | 3.463 3.682 3.571 3.776 3.656 3.851 3.725 3.912 3.780 3.962 3.824 4.001 3.859 4.033 3.887 4.059 3.910 4.080 3.928 4.097 3.942 4.110 3.954 4.121 3.963 4.130 3.970 4.137 3.976 4.143 3.981 4.147 3.985 4.151 3.988 4.154 | 3.990 4.157 3.992 4.159 3.994 4.160 3.995 4.166 3.999 III III PL I 40