Question: EXERCISE 7-7 Net Present Value Analysis of Two Alternatives LO 7-2 Perit Industries has $100,000 to invest. The company is trying to decide between

EXERCISE 7-7 Net Present Value Analysis of Two Alternatives LO 7-2 Perit

EXERCISE 7-7 Net Present Value Analysis of Two Alternatives LO 7-2 Perit Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required.. Working capital investment required Annual cash inflows..... Salvage value of equipment in six years Life of the project... Project A Project B $100,000 $0 $0 $21,000 $100,000 $16,000 $8,000 $0 6 years 6 years 6) The working capital needed for Project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Required: 1. Compute the net present value of Project A. 2. Compute the net present value of Project B. 3. Which investment alternative (if either) would you recommend that the company accept?

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