Perit Industries has $150,000 to invest. The company is trying to decide between two alternative uses of the funds. Thealternatives are:Project AProject B$0Cost of equipment required$ 150,000$0$ 150,000Working capital investment requiredAnnual cash inflows$ 24,000$ 8,500Salvage value of equipment in six years$ 37,000$0yearsLife of the project6 years6The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries'discount rate is 15%.Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.Required:1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to thenearest whole dollar amount.)2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to thenearest whole dollar amount.)3. Which investment alternative (if either) would you recommend that the company accept?

Net present value (NPV) of an alternative/project refers to the variance between the initial…

Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend that the company accept?

Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend that the company accept?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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