Question
Perit Industries has $180,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project
Perit Industries has $180,000 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 $ 180,000 $ 0 Working capital investment required $ 0 $ 180,000 Annual cash inflows $ 32,000 $ 54,000 Salvage value of equipment in six years $ 9,300 $ 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 15%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: 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. 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. Which investment alternative (if either) would you recommend that the company accept?
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