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

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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 B is:

▸ $90,355

▸ $76,115

▸ $36,115

▸ $54,355

Textbook

Introduction to Managerial Accounting: Brewer Edition: 9e

Edition: 9^th

Authors: Brewer, Garrison, Noreen

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crusherpsg

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OlKu Author

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Thanks for your help!!

tcat

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

jamiebonf99

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Good timing, thanks!

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