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Perrot Industries has $330,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow: Cost of
Perrot Industries has $330,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A B $285,000 $285,000 64,050 22,600 57,900 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perrot Industries' discount rate is 10%. 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.) Project A Project B Net Present Value 1-b. Which investment alternative (if either) would you recommend that the company accept?
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