Solution-Calculate net present value for each project

Calculate net present value for each project

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Reference no: EM132461995

Problem - 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%.

Required -

1. Calculate net present value for each project.

2. Which investment alternative (if either) would you recommend that the company accept?

a. Project A

b. Project B

Reference no: EM132461995

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Calculate net present value for each project

Reference no: EM132461995

Reference no: EM132461995

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