Question
Perrot Industries has $390,000 to Invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow: Project B Cost
Perrot Industries has $390,000 to Invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow: Project B Cost of equipment required $390,000 Working capital Investment $390,000 required Annual cash Inflows 72,400 63,900 Salvage value of equipment In 25,000 six years 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 13%. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 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 Which Investment alternative (if either) would you recommend that the company accept? O Project A O Project B
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