(Answered) Question - perit industries has 155000 to invest the

Accounting

Question - 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	Project B
Cost of equipment required	$155,000	$0
Working capital investment required	$0	$155,000
Annual cash inflows	$20,000	$55,000
Salvage value of equipment in six years	$9,400	$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 14%.

Required:

1. Compute the net present value of Project A.

2. Compute the net present value of Project B.

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

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