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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 $8,000 6 years Project A Project B 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%. (Ignore income taxes.) $100,000 $15,750 Required: (a)Using Excel, calculate net present value for each project. (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) (Click to select) Project B Project A $0 6 years Net present value $MORE $ (b)Which investment alternative (if either) would you recommend that the company accept?

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 $8,000 6 years Project A Project B 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%. (Ignore income taxes.) $100,000 $15,750 Required: (a)Using Excel, calculate net present value for each project. (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) (Click to select) Project B Project A $0 6 years Net present value $MORE $ (b)Which investment alternative (if either) would you recommend that the company accept?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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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 Project A Project 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%. (Ignore income taxes.) $0 $21,000 $8,000 $0 6 years 6 years $100,000 $15,750 Required: (a)Using Excel, calculate net present value for each project. (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) (Click to select) Project B Project A Net present value $ $ (b)Which investment alternative (if either) would you recommend that the company accept?
Transcribed Image Text: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 Project A Project 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%. (Ignore income taxes.) $0 $21,000 $8,000 $0 6 years 6 years $100,000 $15,750 Required: (a)Using Excel, calculate net present value for each project. (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) (Click to select) Project B Project A Net present value $ $ (b)Which investment alternative (if either) would you recommend that the company accept?
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