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 $ 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’ discount rate is 17%.   Click here to view Exhibit 13B-1 and Exhibit 13B-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 recommend that the company accept?

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.