Question
Perrot Industries has $340,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow: Project A B
Perrot Industries has $340,000 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 | $ | 295,000 | ||||
| Working capital investment required | $ | 295,000 | ||||
| Annual cash inflows | 65,950 | 58,900 | ||||
| Salvage value of equipment in six years | 23,000 | |||||
| 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. Perrot Industries discount rate is 10%.
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Fundamentals of Financial Management
Authors: Eugene F. Brigham
Concise 9th Edition
1305635937, 1305635930, 978-1305635937
