Perit Industries has $150,000 to invest. The company is trying to decide between two alternative uses of the funds. Thealternatives are:Project AProject B$0Cost of equipment required$ 150,000$0$ 150,000Working capital investment requiredAnnual cash inflows$ 24,000$ 8,500Salvage value of equipment in six years$ 37,000$0yearsLife of the project6 years6The 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 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 thenearest whole dollar amount.)2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to thenearest whole dollar amount.)3. Which investment alternative (if either) would you recommend that the company accept?

Net present value (NPV) of an alternative/project refers to the variance between the initial…

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?

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?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 5PA

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