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Perit Industries has $130,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project B $
Perit Industries has $130,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project B $ Project A 130,000 $ $ $ Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project 130,000 65,000 $ $ 21,000 8,100 6 years GS 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 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor(s) using tables. Required: a. Calculate net present value for each project. Project A Project B Net present value b. Which investment alternative (if either) would you recommend that the company accept? O Project A O Project B
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