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