Perit Industries has $130,000 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 $ 130,000 Project B $ 0 $ 0 $ 130,000 $ 22,000 $ $ 8,300 33,000 $ 0 6 years 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? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would recommend that the company accept? you Project B
Perit Industries has $130,000 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 $ 130,000 Project B $ 0 $ 0 $ 130,000 $ 22,000 $ $ 8,300 33,000 $ 0 6 years 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? 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would recommend that the company accept? you Project B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Transcribed Image Text:Perit Industries has $130,000 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
$ 130,000
Project B
$ 0
$ 0
$ 130,000
$ 22,000
$
$ 8,300
33,000
$ 0
6 years
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?
1. Net present value project A
2. Net present value project B
3. Which investment alternative (if either) would
recommend that the company accept?
you
Project B
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