Question 1

Perit Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:

	Project A	Project B
Cost of equipment required	$100,000	$0
Working capital investment required	$0	$100,000
Annual cash inflows	$21,000	$15,750
Salvage value of equipment in six years	$8,000	$0
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%. (Ignore income taxes.)

Required:

(a)	Using Excel, calculate net present value for each project. (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

	Net present value
Project A	$
Project B	$

Question 2

Required information

[The following information applies to the questions displayed below.]

Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. (Ignore income taxes.)

Requirement 1:

What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? (Omit the "$" sign in your response.)

Total annual cash inflows

$