ercis Perit Industries has $200,000 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 Analysis of Iwo Alternatives [LO12-2] Project A $ 200,000 $0 $ 29,000 $ 9,000 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? 6 years Project B $0 $ 200,000 $ 51,000 $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 14%. Click here to view Exhibit 12B-1 and Exhibit 12B-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?

ercis Perit Industries has $200,000 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 Analysis of Iwo Alternatives [LO12-2] Project A $ 200,000 $0 $ 29,000 $ 9,000 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? 6 years Project B $0 $ 200,000 $ 51,000 $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 14%. Click here to view Exhibit 12B-1 and Exhibit 12B-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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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