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Perit Industries has $140,000 to invest in one of the following two projects: Cost of equipment required Project A $140,000 Working capital investment required
Perit Industries has $140,000 to invest in one of the following two projects: Cost of equipment required Project A $140,000 Working capital investment required Annual cash inflows $0 Salvage value of equipment in six years $ 26,000 $9,700 16 Life of the project 6 years Project B $ 0 $140,000 $60,000 $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 17% 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. 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?
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