Question

Over the Rainbow 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. Over the Rainbow 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 each project.


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  • CreatedJuly 08, 2015
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