(Ignore income taxes in this problem.) Rushforth Manufacturing has $102,000 to i

Question

(Ignore income taxes in this problem.) Rushforth Manufacturing has $102,000 to invest in either Project A or Project B. The following data are available on these projects: Project A Project B Cost of equipment needed now $102,000 $46,000 Working capital investment needed now $56,000 Annual cash operating inflows $38,000 $26,800 Salvage value of equipment in 6 years $13,000 Both projects will have a useful life of 6 years. At the end of 6 years, the working capital investment will be released for use elsewhere. Rushforth's required rate of return is 14%. The net present value of Project B is: (Round final answer to the nearest whole dollar.) rev: 12_14_2012, 12_21_2012 $27,729 $14,280 $58,225 $2,225

Explanation / Answer

$27,729

Year cashflow PV factor Disc cashflow 0 -102000 1        (102,000.00) 1 to 6 years 26,800 3.8887          104,217.16 6 56,000 0.4556             25,512.85 NPV             27,730.01 Note: cashflow outflow in year 0 = -46000-56000

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