The working capital needed for project b will be released

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Wriston Company has $360,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are as follows:

Cost of equipment required                            $   360,000      $   0   

Working capital investment required              $   0                  $   360,000

Annual cash inflows                                         $   97,000        $   76,000

Salvage value of equipment in eleven years   $   38,000        $   0

Life of the project      11 years        11 years

The working capital needed for project B will be released for investment elsewhere at the end of eleven years. Wriston Company uses a 15% discount rate. (Ignore income taxes.)

Calculate net present value for each project.

Reference no: EM13568057

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