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Question 6 Smart Company has $750,000 to irrvest and is trying to decide between two alternatives. The company uses a discount rate of 20%. Income
Question 6 Smart Company has $750,000 to irrvest and is trying to decide between two alternatives. The company uses a discount rate of 20%. Income tax is ignored. The details are as below Project A Project B Cost of the equipment $750,000 0 Working capital investment, to be released after 7 years 0 $750,000 Annual cash inflows $210.000 $150,000 Salvage value of the equipment $50,000 Life of project 7 years 7 years 0 I Required: Which investment project would you recommend to Smart company? (15 marks) 3
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