The Sunshine company is considering two projects, project A & project B. Project A requires the purchase of an equipment but no working capital investment whereas project B requires a working capital investment but no equipment. The relevant information fornet present valueanalysis is given below: The working capital required for project B will be released at the end of project life. Sunshine company uses an 18% discount rate.

Required:Are the two projects comparable using net present value (NPV)? If yes, Select the best investment using net present value (NPV) method. (Ignore income tax).

Project A Project B Cost of equipment $600.000 Working capital needed $ 600,000 Annual cash inflows $160.000 $120.000 Salvage value of equipment $ 40,000 Project life 8 years 8 years