Perit Industries has $135,000 to invest in one of the following two projects:Project ACost of equipment requiredAnnual cash inflows$ 135,000Project B$ 0Working capital investment required$ 0kSalvage value of equipment in six yearsLife of the project$ 22,000$ 8,400$ 135,000$66,000$ 06 yearstences6 yearsThe working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discountrate is 17%.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.Required:1. Compute the net present value of Project A.Note: 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.Note: 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 A2. Net present value project B3. Which investment alternative (if either) would yourecommend that the company accept?Project B

Step 1:1)We have to calculate the net present value of the project A.Calculations are shown…

Answered: Perit Industries has $135,000 to invest…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 4P

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1
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