Perit Industries has $100,000 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 $100,000 $0 $0 $21,000 $8,000 6 years Project A Project B The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. (Ignore income taxes.) $100,000 $15,750 Required: (a)Using Excel, calculate net present value for each project. (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) (Click to select) Project B Project A $0 6 years Net present value $MORE $ (b)Which investment alternative (if either) would you recommend that the company accept?
Perit Industries has $100,000 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 $100,000 $0 $0 $21,000 $8,000 6 years Project A Project B The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. (Ignore income taxes.) $100,000 $15,750 Required: (a)Using Excel, calculate net present value for each project. (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) (Click to select) Project B Project A $0 6 years Net present value $MORE $ (b)Which investment alternative (if either) would you recommend that the company accept?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 5PA
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