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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 $ 125,000 Project A $ 0 Project B $ 0 $ 125,000 Salvage value of equipment in six years $ 20,000 $ 8,000 $ 64,000 $ 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 17%. Click here to view Exhibit 7B-1 and Exhibit 7B-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? Project B
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