Perit Industries has $180,000 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 $ 180,000 $0 $ 32,000 $ 9,300 6 years. Project B $0 $ 180,000 $ 54,000 50 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 15% Click here to view Exhibit 14B-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using tables. Required: up of Project À (Enter negative values with a minus sign. Round your final answer to the nearest
Perit Industries has $180,000 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 $ 180,000 $0 $ 32,000 $ 9,300 6 years. Project B $0 $ 180,000 $ 54,000 50 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 15% Click here to view Exhibit 14B-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using tables. Required: up of Project À (Enter negative values with a minus sign. Round your final answer to the nearest
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 $180,000 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 i
Life of the project
Project A
$ 180,000
50
$ 32,000
$ 9,300
1. Net present value project A
2. Net present value project B
3. Which investment alternative (d either) would you
recommend that the company accept?
6 years
Project B
$0
$ 180,000
$ 54,000
50
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 15%
Click here to view Exhibit 14B-1 and Exhibit 148-2. 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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F88d3dcdf-f9e7-4db7-8025-bc4adc8b2f49%2F0108f792-4efc-4d9b-a89a-1e5318fb23c2%2Fqyb64mg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Perit Industries has $180,000 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 i
Life of the project
Project A
$ 180,000
50
$ 32,000
$ 9,300
1. Net present value project A
2. Net present value project B
3. Which investment alternative (d either) would you
recommend that the company accept?
6 years
Project B
$0
$ 180,000
$ 54,000
50
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 15%
Click here to view Exhibit 14B-1 and Exhibit 148-2. 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?
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