Calculate net present value for each project

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Reference no: EM131213265

Perit Industries has $155,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $155,000 $0 Working capital investment required $0 $155,000 Annual cash inflows $25,000 $40,000 Salvage value of equipment in six years $8,600 $0 Life of the project 6 years 9 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 14%. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required: a. Calculate net present value for each project. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)

b. Which investment alternative (if either) would you recommend that the company accept? Project A Project B

Reference no: EM131213265

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