K Industries has $$150,000$ to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:

The working capital needed for project B will be released at the end of six years for investment elsewhere. Janel Industries$$ discount rate is $8\%.$

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?

Project A

Project B

Cost of equipment required

$$150,000$

$$0$

Working capital investment required

$$0$

$$150,000$

Annual cash inflows

$$31,000$

$$16,000$

Salvage value of equipment in six years

$$25,000$

$$0$

Life of the project

$5$ years

$5$ yearsK Industries has $$150,000$ to invest. The company is trying to

decide between two alternative uses of the funds. The

alternatives are:

The working capital needed for project $B$ will be released at the

end of six years for investment elsewhere. Janel Industries'

discount rate is $8\%.$

Required:

Compute the net present value of Project $A.$

Compute the net present value of Project B$.$

Which investment alternative $($if either$)$ would you

recommend that the company accept?