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Wriston Company has $300,000 to invest. The company is trying to

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Question

Wriston Company has $300,000 to invest. The company is trying to decide two alternative uses of the funds. The alternatives are as follows;A B;Cost of equipment required $300,000 $0;Working capital investment required $0 $300,000;Annual cash inflows $80,000 $60,000;Salvage value of equipment in 7 years $20,000 $0;Life of project 7 years 7 years;The working capital needed for project B will be released for investment elsewhere at the end of seven years. Wriston Company uses a 20% discount rate.;REQUIRED;(Ignore income taxes.) Which investment alternative (if either) would you recommend that the company accept? Show all;computations using the net present value format. Prepare separate computations for each project.

 

Paper#26512 | Written in 18-Jul-2015

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