Perit Industries has $125,000 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 $ 125,000 S 0 Working capital investment required $ 0 $ 125,000 Annual cash inflows $ 20,000 $ 64,000 Salvage value of equipment in six years $ 8,000 $ 0 Life of the project 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 has $125,000 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 $ 125,000 S 0 Working capital investment required $ 0 $ 125,000 Annual cash inflows $ 20,000 $ 64,000 Salvage value of equipment in six years $ 8,000 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 17P
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