Cost of equipment required Perit Industries has $140,000 to invest in one of the following two...

Transcribed Image Text:

Cost of equipment required Perit Industries has $140,000 to invest in one of the following two projects: Working capital investment required Project A $ 140,000 $ 0 Project B $ 0 $ 23,000 $ 8,500 $ 140,000 $ 67,000 6 years Annual cash inflows Salvage value of equipment in six years Life of the project $ 0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 17%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: 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. Note: 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? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? Cost of equipment required Perit Industries has $140,000 to invest in one of the following two projects: Working capital investment required Project A $ 140,000 $ 0 Project B $ 0 $ 23,000 $ 8,500 $ 140,000 $ 67,000 6 years Annual cash inflows Salvage value of equipment in six years Life of the project $ 0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 17%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: 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. Note: 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? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept?