A9 Perit Industries has $175,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternativesare:Project ACost of equipment requiredWorking capital investment requiredAnnual cash inflows$ 175,000Project B$ 0Salvage value of equipment in six years$ 0$ 27,000$ 8,800$ 175,000$ 44,000$ 0Life of the project6 years6 yearsThe working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discountrate 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 the nearestwhole dollar amount.)2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearestwhole dollar amount.)3. Which investment alternative (if either) would you recommend that the company accept?1. Net present value project A2. Net present value project B3. Which investment alternative (if either) would yourecommend that the company accept?

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Answered: Perit Industries has $175,000 to…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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Perit Industries has $110,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows i Salvage value of equipment in six years Life of the project Project A $ 110,000 $0 $ 20,000 $ 8,600 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? 6 years Project B $0 $ 110,000 $ 68,000 $0 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 16%. Click here to view Exhibit 148-1 and Exhibit 148-2, 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 the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter…
Perit Industries has $155,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project $ 155,000 Project A $ 0 Project B $ 0 $ 155,000 $ 25,000 $ 8,600 $ 40,000 6 years $ 0 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 14%. 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 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…
Perit Industries has $175,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 175,000 Project B $ 0 $ 0 $ 175,000 $ 27,000 $ 44,000 $ 8,800 6 years $ 0 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 15%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: 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. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 3. Which investment alternative (if either)…
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Project A Project B $135,000 $ $ 0 0 Working capital investment required Annual cash inflows $ 22,000 $135,000 $ 66,000 0 Salvage value of equipment in six years. Life of the project $ 8,400 $ 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%. 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 value 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 value with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you…
Perit Industries has $155.000 to invest. The company is trying to decide between two alternative uses of the funds. The altematives are: Project A Project B $155,000 Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project $ 20,000 $ 9,400 6 years $155, 000 $ 55,000 24 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 14%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Requlred: 1. Compute the net present value of Project A. (Enter negative value 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 value with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend…
Perit Industries has $150,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B $0 Cost of equipment required $ 150,000 $0 $ 150,000 Working capital investment required Annual cash inflows $ 24,000 $ 8,500 Salvage value of equipment in six years $ 37,000 $0 years Life of the project 6 years 6 The 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 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…
Perit Industries has $155,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Cost of equipment required Working capital investment required. Annual cash inflows $ 155,000 Project B $ 0 $ 0 $ 155,000 Salvage value of equipment in six years $ 25,000 $ 8,600 $ 40,000 Life of the project 6 years $ 0 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 14%. Click here to view Exhibit 14B-1 and Exhibit 14B-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 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…
The industry has invested $100,000. They are trying to decide between two alternatives uses of the funds Project A Project B Cost of equipment required $100,000 $0 Working capital investment required $0 $100,000 Annual Cash Inflows $21,000 $16,000 Salvage value of equipment in 6 yrs $8,000 $0 Life of project 6 years 6 years The working capital needed for project B will be released at the end of the six-years for investment elsewhere. The industry discount rate 14%. 1.Compute the net present value of project A 2. Compute the net present value of project B Which investment alternative if either would you recommend to the company to accept? Thank you,

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