Perit Industries has $155,000 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 $155,000 $0 Working capital investment required $0 $155,000 Annual cash inflows $20,000 $55,000 Salvage value of equipment in six years $9,400 $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 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: a. Calculate net present value for each project.

b. Which investment alternative (if either) would you recommend that the company accept?

Project A

Project B