Maple Tree Industries has $ 265,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follows

                                                                       Project A           Project B

Cost of equipment required                    $265,000

Working capital investment required                                 $265,000

Annual Cash inflow                                    $55,650               $42,400

Residue value of equipment in 8 years     $21,200

Life of the project                                          8 years          8 years

The working capital needed for project B will be released at the end of eight years for investment elsewhere. Canada Fair Market interest rate is 13%

Which Investment option would you recommend the company to accept? Please show separate calculations and formulas for each project using the NPV method.

Answer rating: 100% (QA)

Answer Investment B is good Initial Investment 26500... View the full answer