Required: 1. Compute the net present value of Project A. (Enter negative value 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 value 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?
Required: 1. Compute the net present value of Project A. (Enter negative value 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 value 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject: accounting
Transcribed Image Text:B
ces
Required:
1. Compute the net present value of Project A. (Enter negative value 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 value 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 A
2.
Net present value project B
3.
Which investment alternative (if either) would you
recommend that the company accept?
![Exercise 12-7 Net Present Value Analysis of Two Alternatives [LO12-2]
Perit Industries has $220,000 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 Project B
$220,000
$
$0
0
$220,000
$ 31,000
$ 53,000
$ 9,200 $
0
6 years 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 12B-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables.
Required:
1. Compute the net present value of Project A. (Enter negative value 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 value 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%2Fc7fe5a73-45e4-4166-8ba1-50e355550dfc%2Fd63ab22c-3745-4d12-99b7-31f31fd50e8b%2F2u7ofj6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 12-7 Net Present Value Analysis of Two Alternatives [LO12-2]
Perit Industries has $220,000 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 Project B
$220,000
$
$0
0
$220,000
$ 31,000
$ 53,000
$ 9,200 $
0
6 years 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 12B-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables.
Required:
1. Compute the net present value of Project A. (Enter negative value 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 value 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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