Vishnu Perit Industries has $155,000 to invest in one of the following two projects:Project A$ 155,000$ 0Project B$ 0Cost of equipment requiredWorking capital investment requiredAnnual cash inflowsSalvage value of equipment in six yearsLife of the project$ 25,000$ 8,600$ 155,000$ 40,0006 years$ 06 yearsThe working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discountrate is 14%.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

project B is a better investment for Perit Industries because it has a positive netpresent Value…

Answered: Perit Industries has $155,000 to invest…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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Perit Industries has $135,000 to invest in one of the following two projects: Project A Cost of equipment required Annual cash inflows $ 135,000 Project B $ 0 Working capital investment required $ 0 k Salvage value of equipment in six years Life of the project $ 22,000 $ 8,400 $ 135,000 $ 66,000 $ 0 6 years t ences 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 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…
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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,
Courtney Limited has capital project opportunities each of which would require an initial investment of $400,000. Details for each opportunity are shown below. Investment in manufacturing equipment Investment 1 $400,000 Investment 2 Net annual cash inflows Investment in working capital Life of the project CCA $100,000 $400,000 $100,000 12 Years 30% 12 Years The robotic equipment would have a salvage value of $75,000 in 12 years. The equipment would be depreciated over 12 years. At the end of 12 years, the investment in working capital would be released for use elsewhere. The company requires an after-tax return of 12% on all investments. The tax rate is 30%. Required: Compute the net present value of each investment project. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar.) > Answer is complete but not entirely correct. Net present value Investment 1 $ 103,186 x…
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te.7
Courtney Limited has capital project opportunities each of which would require an initial investment of $400,000. Details for each opportunity are shown below: Investment in manufacturing equipment Investment 1 $400,000 Investment 2 Investment in working capital Net annual cash inflows $100,000 $400,000 $100,000 Life of the project CCA 12 Years 30% 12 Years ces The robotic equipment would have a salvage value of $75,000 in 12 years. The equipment would be depreciated over 12 years. At the end of 12 years, the investment in working capital would be released for use elsewhere. The company requires an after-tax return of 12% on all investments. The tax rate is 30%. Required: Compute the net present value of each investment project. (Hint Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar.) Investment 1 Investment 2 Net present value

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