Perit Industries has $100,000 to invest. The company is trying to decide between

Question

Perit Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:

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%. (Ignore income taxes.)

Solve this problem using your financial calculator or Excel, NOT the tables in the chapter.

1. Calculate the NVP for project B?

Perit Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:

Explanation / Answer

NPV of Project B = -100000 + 15,750/1.14 + 15,750/1.14^2 + 15,750/1.14^3 + 15,750/1.14^4 + 15,750/1.14^5 + 15,750/1.14^6 +100000/1.14^7 = $6805.17

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