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?
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
Annual
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
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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