Perit Industries has $150,000 to Invest. The company is trying to decide between two alternative uses of the funds. The alternativesare:Cost of equipment requiredWorking capital investment requiredAnnual cash inflowsSalvage value of equipment in six yearsLife of the projectProject A$ 150,000Project B$ 0$ 0$ 150,000$ 24,000$8,500$ 37,0006 years506 yearsThe working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discountrate is 15%Click here to view Exhibit 128-1 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 nearestwhole dollar amount.)2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearestwhole 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?

1.Project A Year 0 (Now)Years 1-6Year 6Purchase of equipment$(150,000) Annual cash inflows $24,000…

Answered: Perit Industries has $150,000 to…

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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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 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? $ 135,000 $0 $ 25,000 $ 9,800 6 years Project B $0 $ 135,000 $ 63,000 $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 148-1 and Exhibit 14B-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…
The industry has invested $100,000. They are trying to decide between two alternatives uses of the funds Project A Project B Cost of equipment required $100,000 $0 Working capital investment required $0 $100,000 Annual Cash Inflows $21,000 $16,000 Salvage value of equipment in 6 yrs $8,000 $0 Life of project 6 years 6 years The working capital needed for project B will be released at the end of the six-years for investment elsewhere. The industry discount rate 14%. 1.Compute the net present value of project A 2. Compute the net present value of project B Which investment alternative if either would you recommend to the company to accept? Thank you,
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