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Lambert Manufacturing has $100,000 to invest in either Project A or Project B. The following data ...

deroth

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Lambert Manufacturing has $100,000 to invest in either Project A or Project B. The following data ...

Lambert Manufacturing has $100,000 to invest in either Project A or Project B. The following data are available on these projects (Ignore income taxes.):

	Project A	Project B
Cost of equipment needed now	$ 100,000	$ 60,000
Working capital investment needed now	$ 0	$ 40,000
Annual cash operating inflows	$ 40,000	$ 35,000
Salvage value of equipment in 6 years	$ 10,000	$ 0

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.

Both projects will have a useful life of 6 years and the total cost approach to net present value analysis. At the end of 6 years, the working capital investment will be released for use elsewhere. Lambert's required rate of return is 14%.

The net present value of Project A is:

▸ $51,000

▸ $60,120

▸ $55,560

▸ $94,450

Textbook

Introduction to Managerial Accounting: Brewer Edition: 9e

Edition: 9^th

Authors: Brewer, Garrison, Noreen

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Ms T.

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deroth Author

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Good timing, thanks!

erimis

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I appreciate what you did here, answered it right Smiling Face with Open Mouth

shimyshiguy

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Correct

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