Wriston Company has $300,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are as follows:

The working capital needed for project B will be released for investment elsewhere at the end of seven years. Wriston Company uses a 20% discount rate.
Required:
(Ignore income taxes.) Which investment alternative (if either) would you recommend that the company accept? Show all computations using the net present value format. Prepare separate computations for eachproject.

Transcribed Image Text:

$300,000 Cost of equipment required Working capital investment required.. Annual cash inflows Salvage value of equipment in seven years. Life of the project $0 $O $300,000 $80,000 $60,000 S0 7 years 7 years $20,000