Te working capital investment will be released for use

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Reference no: EM13567252

Lambert Manufacturing has $100,000 to invest in either Project A or Project B. The following data are available on these projects:

 

Project A

Project B

Cost of equipment needed now

$100,000

$60,000

Working capital investment needed now

 

$40,000

Annual cash operating inflows

$40,000

$35,000

Salvage value of equipment in 6 years

$10,000

 

Both projects will have a useful life of 6 years. At the end of 6 years, the working capital investment will be released for use elsewhere. Lambert"s required rate of return is 14%. The company uses the total cost approach to evaluating alternatives.

1. The net present value of Project A is:

A) $51,000

B) $60,120

C) $55,560

D) $94,450

2. The net present value of Project B is:

A) $90,355

B) $76,115

C) $36,115

D) $54,355

Reference no: EM13567252

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