q6 ch 12

Perit Industries has $155,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B $0 Cost of equipment required $ 155,000 $0 $ 155,000 Working capital investment required Annual cash inflows $ 20,000 $ 9,400 $ 55,000 $0 Salvage value of equipment in 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. Perit Industries' discount rate is 14%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend that the company accept? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? Project B