Solution-Calculate net present value for each project

Calculate net present value for each project

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Reference no: EM131590197

Question - Wriston Company has $300,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are as follows:

	A	B
Cost of equipment required	$300,000	$0
Working capital investment required	$0	$300,000
Annual cash inflows	$80,000	$60,000
Salvage value of equipment in seven years	$20,000	$0
Life of the project	7 years	7 years

The working capital needed for project B will be released for investment elsewhere at the end of seven years. Wriston Company uses a 20% discount rate.

Required:

a. Calculate net present value for each project.

b. Which investments alternatives (if either) would you recommend that the company accept?

Reference no: EM131590197

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Calculate net present value for each project

Reference no: EM131590197

Reference no: EM131590197

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