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Business, 26.05.2020 20:01 morgaaaan651

Erit Industries has $175,000 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 $ 175,000 $ 0 Working capital investment required $ 0 $ 175,000 Annual cash inflows $ 27,000 $ 44,000 Salvage value of equipment in six years $ 8,800 $ 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.

Required:

a) Calculate net present value for each project.

b) Which investment alternative (if either) would you recommend that the company accept? Project B or Project A

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Answers: 1

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Erit Industries has $175,000 to invest. The company is trying to decide between two alternative uses...
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