Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Perit Industries has $180,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of

image text in transcribed

Perit Industries has $180,000 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 $ 180,000 Project B $ 0 $ 0 $ 32,000 $ 9,300 $ 180,000 $ 54,000 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 12B-1 and Exhibit 12B-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 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Survey of Accounting

Authors: Edmonds, old, Mcnair, Tsay

2nd edition

9780077392659, 978-0-07-73417, 77392655, 0-07-734177-5, 73379557, 978-0073379555

More Books

Students also viewed these Accounting questions