Question
Reddmill Manufacturing has $100,000 to invest. The company is trying to decide between two different uses of the funds. The alternatives are: Cost of equipment
Reddmill Manufacturing has $100,000 to invest. The company is trying to decide between two different uses of the funds. The alternatives are:
Cost of equipment required $100,000 $ - Working capital investment required $ - $100,000 Annual cash inflows $ 21,000 $ 16,000 Salvage value of equipment in six years $ 8,000 $ - Life of the project 6 years 6 years
The working capital needed for project Y will be released at the end of six years for investment elsewhere. Reddmill Manufacturings discount rate is 14%. Required: Which investment alternative (if either) would you recommend that the company accept? Show all calculations in excel using the net present value format. Must show a schedule that reflects each of the six years (as modeled in class and outlined in the PowerPoint presentation). Prepare separate calculations for each project
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