Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses...

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Perit Industries has $135,000 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 $ 135,000 $0 $ 22,000 $ 8,400 6 years 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? Project B $0 $ 135,000 $ 66,000 $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 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (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. (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? EXHIBIT 128-1 Present Value of $1, Periods 4% 5% 6% 7% 8% 9% 0.926 0917 10% 0909 0952 0943 11% 12% 13% 14% 15% 16% 17% 15% 20% 19% 21% 22% 23% 24% 25% 0.935 0901 0893 0885 0877 0870 0862 0855 0847 0840 0.833 0826 0 820 0813 0.806 0 800 0925 0.907 0890 0.873 0.857 0842 0826 0812 0.797 0783 0.769 0.756 0.743 0.731 0.718 0706 0694 0683 0672 0661 0650 0.640 0.889 0.864 0840 0.816 0794 0772 0751 0731 0.712 0695 0.675 0658 0641 0624 0609 0.593 0579 0564 0551 0537 0.524 0512 0855 0823 0.792 0.763 0.735 0.708 0.683 0659 0616 0613 0592 0572 0552 0534 0516 0.499 0.482 0467 0451 0417 0423 0.410 0822 0.784 0.747 0.713 0681 0.650 0.621 0593 0567 0543 0519 0497 0476 046 0437 0419 0402 0386 0.370 0355 0.341 0.328 0.790 0.746 0705 0666 056405350507 0480 0456 0.432 04100390 0370 0352 0335 0.319 0303 0289 0275 0262 0.760 0.711 0665 0.623 0.583 0347 0313 04820452 0425 0400 0.376 0354 0333 0314 0296 0279 0.263 0249 0235 0222 0210 0.731 0677 0627 0582 0340 0.502 0.467 0434 0404 0376 0351 0327 0.305 0.285 0266 0249 0233 0218 0204 0.191 0179 0168 0.703 0645 0.592 0544 0.500 0 460 0 424 0 391 0361 0333 0308 0.284 0263 0243 022502090 194 0180 0.167 0.155 0144 0134 0.676 0614 0.558 0508 04630422 0.386 0352 0322 | 0295 0270 0247 0227 0208 0.191 0.176 0.162 0.149 0137 0.126 0.116 0107 0.650 0.585 0.527 0.475 0429 0.365 0.350 0317 0.287 0261 0237 0215 0195 0178 0.162 0 148 0135 0.123 0112 0.103 0.094 0086 0625 0.557 0.497 0444 0.397 0356 0319 0286 0.257 0231 0208 0187 0168 0152 0137 0124 01120102 0.092 0.083 0.076 0069 0601 0530 0469 0415 0.368 0326 0290 0.258 0229 0204 0 152 0163 0145 0130 0 116 0104 0.093 0075 0.068 0055 0577 0505 0.442 0 388 0340 0299 0263 0232 0205 0181 0160 01410125 0111 0099 008 0078 0069 0062 0055 0.049 0044 0.555 0481 0417 0362 0315 0275 6239 0209 0183 0 160 0140 0123 0108 0.095 0.0840074 0065 0057 0051 0045 0.040 0015 0.534 0458 0394 0339 0292 0252 0218 0188 0163 0141 0123 0 107 0091 0.081 0071 0062 0.054 0047 0042 0016 0.0320028 0513 0436 0371 0317 0.270 0231 0198 01700146 0125 0.108 0093 0.080 0.069 0060 0052 0045 0039 0034 000 0026 0.023 0494 0416 0350 0296 0.250 0212 0180 0153 0130 0111 0095 0081 0069 0059 0051 0044 0038 0032 0.028 0024 0.021 0018 0475 0396 0331 0277 0232 0194 0164 0.138 0.116 0098 0.083 007000600051 0041 0037 0031 0027 0023 0020 0017 0014 0456 0377 0312 0258 0215 0178 0149 0124 0.104 0087 0073 0061 0051 0043 0037 0031 0026 0022 0019 0016 0014 0012 0439 0.359 0294 0242 0.199 0.164 01350112 0053 0044 0037 0011 0026 0022 0018 0015 0013 0011 0009 0422 0342 0278 0226 0164 0150 0123 0101 0083 0068 0056 0046 0038 0012 0026 0022 0.018 0015 0013 0011 0009 0.007 0406 0326 0262 0211 0170 0138 0112 00910074 0060 0019 0040 0013 0027 0022 0018 0015 0012 0.0100009 0.007 0.006 0390 0310 0247 0197 0158 0126 0102 0.082 80066 0.053 0043 00150028 0023 0.019 0015 0011 0010 0.008 0.007 0.006 0005 0.375 0295 0233 0.184 0.146 0116 0092 0074 0059 0047 0018 0010 00244 00200016 0013 0010 0009 0.007 0006 0005 0.004 0.361 0281 0220 0172 01350106 00540066 0053 0042 0011 002 0.021 0017 0.014 0011 0009 0001 0006 0.005 000 0001 0347 0268 0.207 0.161 0.125 0.098 0076 0060 0047 0037 0029 0023 0.018 0014 0011 0009 0.007 0006 0005 0004 0.003 0.002 1 2 3 4 5 6 7 S 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 1 (1+r) 2960 9650 0190 1600 1900 2200 1800 1900 EXHIBIT 128-2 Present Value of an Annuity of $1 in Arrears, 1/(1-(1/(1+))) 7% 2 3 4 5 9.385 8863 8.384 7.943 Periods 4% 5% 6% 3% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0962 0.952 0.943 0935 0.926 0917 0.909 0.901 0.893 0.885 0877 0870 0.862 0855 0.847 0.840 0.833 0.826 0.820 0813 0806 0.800 1.886 1.859 1833 1808 1783 1759 1.736 1713 1690 1668 1.647 1626 1605 1585 1566 1547 1528 1509 1.492 1474 1457 1440 2.775 2.723 2673 2.624 2.577 2531 2.487 2444 2.402 2.361 2.322 2283 2246 2210 2174 2140 2.106 2.074 2042 2011 1.981 1.952 3.630 3:5463465 3.387 3312 3240 3170 3.102 3037 2974 2914 2.855 2.798 2.743 2.690 2.639 2.389 2540 2494 2448 2404 2.362 4452 4329 4212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3433 3.352 3.274 3.1993.127 3.058 2991 2926 2864 2.803 2.745 2.689 6 5242 5076 4.917 4.767 4 623 4.486 4.355 4231 4 111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3245 3167 3092 3.020 2.951 6.002 5.786 5.582 5389 5.206 5033 4.868 4712 4564 4423 4288 4.160 4.039 3.922 3.812 3706 3.605 3.508 3.416 3.327 3242 3.161 6.733 6.463 6.210 5.971 5.747 5.535 5335 5.146 4.968 4.799 4.639 4.487 4344 4.207 4078 3954 3.837 3.726 3.619 3.318 3.421 3329 7435 7.108 6802 6.315 6.247 5.995 5.759 5537 5328 5.132 4946 4.772 4607 4451 4.303 4163 4031 3905 3.786 3.673 3566 3.463 8111 7.722 7.360 7.024 6.710 6418 6145 5889 5650 5426 53216 5.019 4.833 4.659 4494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8306 7.887 7.499 7.139 6.805 6.495 6 207 5938 5687 5:453 5234 5029 4.836 4.656 4.486 4327 4177 4.035 3.902 3.776 3,656 7536 7.161 6.814 6.492 6194 5.918 5.660 5421 5.197 4.988 4.793 4611 4.439 4278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6750 6424 6122 58425583 5342 5 118 4910 4715 4.533 4.362 4203 4.053 3.912 3.780 10.563 9899 9.295 8.745 8 2447.786 7367 6.982 6 628 6 302 6002 5.724 5468 5229 5008 4.802 4611 4432 4265 4.108 3.962 3.824 11.118 10 380 9 712 9.108 8.559 8061 7.606 7.191 6811 6462 6142 5.847 5375 3.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 10.838 10 106 9447 8851 8313 7.824 7379 6914 6604 6 265 5.954 5.665 5405 5162 4938 4.730 4536 4357 4.189 4033 3.887 12 166 9763 9122 8544 8022 7.549 7.120 6729 6373 6047 5.749 5.475 5222 4.990 4775 4576 4.391 4219 4:019 3.910 12.659 11 690 10 828 10 059 9 372 756 201 7.702 7.250 6.840 6.4676128 5818 5534 5.273 5.033 4812 4608 4419 4.243 4080 3.928 13.134 12.085 11.158 10.336 9.604 $950 8365 7839 7366 6.938 6550 6.198 5877 5584 5316 5070 4843 4.635 4442 4261 4097 3942 13.590 12.462 11:470 10.594 9818 9.129 8514 7963 7.469 7025 6623 6259 5.929 5.628 5353 5.101 4870 4657 4460 4279 4110 3.954 14.029 12 821 11.764 10 836 10 017 9292 8649 8075 7562 7102 6687 6312 5973 5665 5384 5.127 4.891 4.675 4476 4292 4 121 3.963 12 042 11 061 10.201 9442 8.772 8176 7645 7170 6743 6359 6011 5.696 5410 5.149 4909 4690 4488 4302 4130 3970 12.303 9580 8.883 8.266 7.718 7.230 6.792 6.399 6044 57235432 5.167 4.925 4.703 4.499 4.311 4137 3.976 15.247 13.799 12 550 9.707 8.985 8.348 7,784 7.283 6.835 6.434 6073 5746 5451 5.182 4937 4.713 4507 4318 4143 3.981 9 823 9077 8422 7.843 7330 6873 6.464 6:097 5766 5467 5.195 4948 4721 4514 4.323 4147 3.985 9929 9161 8488 7.896 7.372 6906 6491 6118 5.783 5 480 5206 4.956 4728 4520 4328 4151 3988 10 027 92375487943 2409 6935 6.514 6.136 5798 5.492 5215 4964 4734 4524 4332 41543990 11 652 11 274 10477 14:451 13.163 14.857 13 489 11 272 10 371 11 469 10.529 15.622 14.094 12.783 11 654 15983 14.375 13.003 11 826 16 330 14 643 13 211 11 987 L S 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 9 10 675 10 810 10 935 Perit Industries has $135,000 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 $ 135,000 $0 $ 22,000 $ 8,400 6 years 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? Project B $0 $ 135,000 $ 66,000 $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 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (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. (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? EXHIBIT 128-1 Present Value of $1, Periods 4% 5% 6% 7% 8% 9% 0.926 0917 10% 0909 0952 0943 11% 12% 13% 14% 15% 16% 17% 15% 20% 19% 21% 22% 23% 24% 25% 0.935 0901 0893 0885 0877 0870 0862 0855 0847 0840 0.833 0826 0 820 0813 0.806 0 800 0925 0.907 0890 0.873 0.857 0842 0826 0812 0.797 0783 0.769 0.756 0.743 0.731 0.718 0706 0694 0683 0672 0661 0650 0.640 0.889 0.864 0840 0.816 0794 0772 0751 0731 0.712 0695 0.675 0658 0641 0624 0609 0.593 0579 0564 0551 0537 0.524 0512 0855 0823 0.792 0.763 0.735 0.708 0.683 0659 0616 0613 0592 0572 0552 0534 0516 0.499 0.482 0467 0451 0417 0423 0.410 0822 0.784 0.747 0.713 0681 0.650 0.621 0593 0567 0543 0519 0497 0476 046 0437 0419 0402 0386 0.370 0355 0.341 0.328 0.790 0.746 0705 0666 056405350507 0480 0456 0.432 04100390 0370 0352 0335 0.319 0303 0289 0275 0262 0.760 0.711 0665 0.623 0.583 0347 0313 04820452 0425 0400 0.376 0354 0333 0314 0296 0279 0.263 0249 0235 0222 0210 0.731 0677 0627 0582 0340 0.502 0.467 0434 0404 0376 0351 0327 0.305 0.285 0266 0249 0233 0218 0204 0.191 0179 0168 0.703 0645 0.592 0544 0.500 0 460 0 424 0 391 0361 0333 0308 0.284 0263 0243 022502090 194 0180 0.167 0.155 0144 0134 0.676 0614 0.558 0508 04630422 0.386 0352 0322 | 0295 0270 0247 0227 0208 0.191 0.176 0.162 0.149 0137 0.126 0.116 0107 0.650 0.585 0.527 0.475 0429 0.365 0.350 0317 0.287 0261 0237 0215 0195 0178 0.162 0 148 0135 0.123 0112 0.103 0.094 0086 0625 0.557 0.497 0444 0.397 0356 0319 0286 0.257 0231 0208 0187 0168 0152 0137 0124 01120102 0.092 0.083 0.076 0069 0601 0530 0469 0415 0.368 0326 0290 0.258 0229 0204 0 152 0163 0145 0130 0 116 0104 0.093 0075 0.068 0055 0577 0505 0.442 0 388 0340 0299 0263 0232 0205 0181 0160 01410125 0111 0099 008 0078 0069 0062 0055 0.049 0044 0.555 0481 0417 0362 0315 0275 6239 0209 0183 0 160 0140 0123 0108 0.095 0.0840074 0065 0057 0051 0045 0.040 0015 0.534 0458 0394 0339 0292 0252 0218 0188 0163 0141 0123 0 107 0091 0.081 0071 0062 0.054 0047 0042 0016 0.0320028 0513 0436 0371 0317 0.270 0231 0198 01700146 0125 0.108 0093 0.080 0.069 0060 0052 0045 0039 0034 000 0026 0.023 0494 0416 0350 0296 0.250 0212 0180 0153 0130 0111 0095 0081 0069 0059 0051 0044 0038 0032 0.028 0024 0.021 0018 0475 0396 0331 0277 0232 0194 0164 0.138 0.116 0098 0.083 007000600051 0041 0037 0031 0027 0023 0020 0017 0014 0456 0377 0312 0258 0215 0178 0149 0124 0.104 0087 0073 0061 0051 0043 0037 0031 0026 0022 0019 0016 0014 0012 0439 0.359 0294 0242 0.199 0.164 01350112 0053 0044 0037 0011 0026 0022 0018 0015 0013 0011 0009 0422 0342 0278 0226 0164 0150 0123 0101 0083 0068 0056 0046 0038 0012 0026 0022 0.018 0015 0013 0011 0009 0.007 0406 0326 0262 0211 0170 0138 0112 00910074 0060 0019 0040 0013 0027 0022 0018 0015 0012 0.0100009 0.007 0.006 0390 0310 0247 0197 0158 0126 0102 0.082 80066 0.053 0043 00150028 0023 0.019 0015 0011 0010 0.008 0.007 0.006 0005 0.375 0295 0233 0.184 0.146 0116 0092 0074 0059 0047 0018 0010 00244 00200016 0013 0010 0009 0.007 0006 0005 0.004 0.361 0281 0220 0172 01350106 00540066 0053 0042 0011 002 0.021 0017 0.014 0011 0009 0001 0006 0.005 000 0001 0347 0268 0.207 0.161 0.125 0.098 0076 0060 0047 0037 0029 0023 0.018 0014 0011 0009 0.007 0006 0005 0004 0.003 0.002 1 2 3 4 5 6 7 S 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 1 (1+r) 2960 9650 0190 1600 1900 2200 1800 1900 EXHIBIT 128-2 Present Value of an Annuity of $1 in Arrears, 1/(1-(1/(1+))) 7% 2 3 4 5 9.385 8863 8.384 7.943 Periods 4% 5% 6% 3% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0962 0.952 0.943 0935 0.926 0917 0.909 0.901 0.893 0.885 0877 0870 0.862 0855 0.847 0.840 0.833 0.826 0.820 0813 0806 0.800 1.886 1.859 1833 1808 1783 1759 1.736 1713 1690 1668 1.647 1626 1605 1585 1566 1547 1528 1509 1.492 1474 1457 1440 2.775 2.723 2673 2.624 2.577 2531 2.487 2444 2.402 2.361 2.322 2283 2246 2210 2174 2140 2.106 2.074 2042 2011 1.981 1.952 3.630 3:5463465 3.387 3312 3240 3170 3.102 3037 2974 2914 2.855 2.798 2.743 2.690 2.639 2.389 2540 2494 2448 2404 2.362 4452 4329 4212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3433 3.352 3.274 3.1993.127 3.058 2991 2926 2864 2.803 2.745 2.689 6 5242 5076 4.917 4.767 4 623 4.486 4.355 4231 4 111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3245 3167 3092 3.020 2.951 6.002 5.786 5.582 5389 5.206 5033 4.868 4712 4564 4423 4288 4.160 4.039 3.922 3.812 3706 3.605 3.508 3.416 3.327 3242 3.161 6.733 6.463 6.210 5.971 5.747 5.535 5335 5.146 4.968 4.799 4.639 4.487 4344 4.207 4078 3954 3.837 3.726 3.619 3.318 3.421 3329 7435 7.108 6802 6.315 6.247 5.995 5.759 5537 5328 5.132 4946 4.772 4607 4451 4.303 4163 4031 3905 3.786 3.673 3566 3.463 8111 7.722 7.360 7.024 6.710 6418 6145 5889 5650 5426 53216 5.019 4.833 4.659 4494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8306 7.887 7.499 7.139 6.805 6.495 6 207 5938 5687 5:453 5234 5029 4.836 4.656 4.486 4327 4177 4.035 3.902 3.776 3,656 7536 7.161 6.814 6.492 6194 5.918 5.660 5421 5.197 4.988 4.793 4611 4.439 4278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6750 6424 6122 58425583 5342 5 118 4910 4715 4.533 4.362 4203 4.053 3.912 3.780 10.563 9899 9.295 8.745 8 2447.786 7367 6.982 6 628 6 302 6002 5.724 5468 5229 5008 4.802 4611 4432 4265 4.108 3.962 3.824 11.118 10 380 9 712 9.108 8.559 8061 7.606 7.191 6811 6462 6142 5.847 5375 3.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 10.838 10 106 9447 8851 8313 7.824 7379 6914 6604 6 265 5.954 5.665 5405 5162 4938 4.730 4536 4357 4.189 4033 3.887 12 166 9763 9122 8544 8022 7.549 7.120 6729 6373 6047 5.749 5.475 5222 4.990 4775 4576 4.391 4219 4:019 3.910 12.659 11 690 10 828 10 059 9 372 756 201 7.702 7.250 6.840 6.4676128 5818 5534 5.273 5.033 4812 4608 4419 4.243 4080 3.928 13.134 12.085 11.158 10.336 9.604 $950 8365 7839 7366 6.938 6550 6.198 5877 5584 5316 5070 4843 4.635 4442 4261 4097 3942 13.590 12.462 11:470 10.594 9818 9.129 8514 7963 7.469 7025 6623 6259 5.929 5.628 5353 5.101 4870 4657 4460 4279 4110 3.954 14.029 12 821 11.764 10 836 10 017 9292 8649 8075 7562 7102 6687 6312 5973 5665 5384 5.127 4.891 4.675 4476 4292 4 121 3.963 12 042 11 061 10.201 9442 8.772 8176 7645 7170 6743 6359 6011 5.696 5410 5.149 4909 4690 4488 4302 4130 3970 12.303 9580 8.883 8.266 7.718 7.230 6.792 6.399 6044 57235432 5.167 4.925 4.703 4.499 4.311 4137 3.976 15.247 13.799 12 550 9.707 8.985 8.348 7,784 7.283 6.835 6.434 6073 5746 5451 5.182 4937 4.713 4507 4318 4143 3.981 9 823 9077 8422 7.843 7330 6873 6.464 6:097 5766 5467 5.195 4948 4721 4514 4.323 4147 3.985 9929 9161 8488 7.896 7.372 6906 6491 6118 5.783 5 480 5206 4.956 4728 4520 4328 4151 3988 10 027 92375487943 2409 6935 6.514 6.136 5798 5.492 5215 4964 4734 4524 4332 41543990 11 652 11 274 10477 14:451 13.163 14.857 13 489 11 272 10 371 11 469 10.529 15.622 14.094 12.783 11 654 15983 14.375 13.003 11 826 16 330 14 643 13 211 11 987 L S 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 9 10 675 10 810 10 935

Answer rating: 100% (QA)

Net present value is the difference between the present value of cash outflows and inflows A positiv... View the full answer