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Perit Industries has $125,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of
Perit Industries has $125,000 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 $125,000 $ 23,000 Project B $ 0 $125,000 $ 71,000 $ 8,900 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 148-1 and Exhibit 148-2. 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
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