Perit Industries has $155,000 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 $155,000 SO $25,000 $9,600 6 years Net present value Required: a. Calculate net present value for each project. Project A Project B SO The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%. $155,000 $57,000 Click here to view Exhibit 118-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Project B $0 6 years b. Which investment alternative (if either) would you recommend that the company accept? Project A Project B
Perit Industries has $155,000 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 $155,000 SO $25,000 $9,600 6 years Net present value Required: a. Calculate net present value for each project. Project A Project B SO The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%. $155,000 $57,000 Click here to view Exhibit 118-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Project B $0 6 years b. Which investment alternative (if either) would you recommend that the company accept? Project A Project B
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
Problem 1PS
Related questions
Question
Don't provide answer in image format
![Exercise 11-5 Net Present Value Analysis of Two Alternatives [LO11-2]
Perit Industries has $155,000 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
$155,000
$0
$25,000
$9,600
6 years
Required:
a. Calculate net present value for each project.
Project A
Net present value
Project B
$0
The working capital needed for project B will be released at the end of six years for investment
elsewhere. Perit Industries' discount rate is 15%.
$155,000
$57,000
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using
tables.
Project B
$0
6 years
b. Which investment alternative (if either) would you recommend that the company accept?
Project A
Project B](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5d8319dd-bfcd-4142-ae8a-35e33f9e44eb%2F15914e56-c9e6-402f-83c6-30b93565c4f9%2F8bbhjta_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 11-5 Net Present Value Analysis of Two Alternatives [LO11-2]
Perit Industries has $155,000 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
$155,000
$0
$25,000
$9,600
6 years
Required:
a. Calculate net present value for each project.
Project A
Net present value
Project B
$0
The working capital needed for project B will be released at the end of six years for investment
elsewhere. Perit Industries' discount rate is 15%.
$155,000
$57,000
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using
tables.
Project B
$0
6 years
b. Which investment alternative (if either) would you recommend that the company accept?
Project A
Project B
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education