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Perit Industries has $155,000 to invest

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Perit Industries has $155,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:

 Project AProject BCost of equipment required$155,000$0Working capital investment required$0$155,000Annual cash inflows$25,000$40,000Salvage value of equipment in six years$8,600$0Life 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%.

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. (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 recommend that the company accept?