Perrot Industries has $325,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow:

	Project
	A			B
Cost of equipment required	$	280,000
Working capital investment required				$	280,000
Annual cash inflows		69,150			57,400
Salvage value of equipment in six years		22,400
Life of the project		8 years			8 years

The working capital needed for project B will be released at the end of eight years for investment elsewhere. Perrot Industries discount rate is 13%.

Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables.

Required:

1-a. Calculate net present value for each project. (Negative amount should be indicated with a minus sign. Round discount factor(s) to 3 decimal places. Round other intermediate calculations and final answers to the nearest whole number.)

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

multiple choice

• Project A

• Project B