Draper Corporation is considering two investment projects, each of which would require a $60,000 initial investment. Cost

Question:

Draper Corporation is considering two investment projects, each of which would require a $60,000 initial investment. Cost and cash flow data concerning the two projects are given below:

Project A Project B Investment in inventory scanning equipment.. Investment in working capital.... Net annual cash inflo

The inventory scanning equipment would have a salvage value of $6,000 in 10 years. The equipment would be depreciated over 10 years. At the end of 10 years, the investment in working capital would be released for use elsewhere. The company requires an after-tax return of 12% on all investments. The tax rate is 30%.
Required:
Compute the net present value of each investment project.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...