Question
Uni-Focus Limited is considering whether to invest $82,000 in Project A or Project B.The following information is available for both projects: Project A Project B
Uni-Focus Limited is considering whether to invest $82,000 in Project A or Project B.The following information is available for both projects:
Project A
Project B
Cost of equipment needed today
$82,000
Working capital requirement
$82,000
Annual cash operating inflows
$12,000
$27,000
Salvage value in 3 years
$8,000
Uni-Focus Limited requires a rate of return of 10% on its capital projects.
Both projects will last 3 years.If Uni-Focus Limited selects Project A, the working capital investment will be released at the end of the 3-year period.
Required:
- Calculate the net present value of each project.
- Which project would you pick based on your net present value calculation?
- Calculate the profitability index for Projects A and B.
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Horngrens Financial And Managerial Accounting The Managerial Chapters
Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura
6th Edition
0134486854, 978-0134486857
