Perit Industries has $110.000 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 $ 110,000 se $ 20,000 5.8.200 Project B 50 $ 110,000 $ 28,000 30 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 148-1 and Exhibit 145-2, to determine the appropriate discount factor(s) using tables

Perit Industries has $110.000 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 $ 110,000 se $ 20,000 5.8.200 Project B 50 $ 110,000 $ 28,000 30 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 148-1 and Exhibit 145-2, to determine the appropriate discount factor(s) using tables

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Perit Industries has $155,000 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 $ 155,000 Project A $ 0 Project B $ 0 $ 155,000 $ 25,000 $ 8,600 $ 40,000 6 years $ 0 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 14%. Click here to view Exhibit 12B-1 and Exhibit 12B-2. to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values 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 values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you…
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