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Are the projects independent or mutually exclusive

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Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $22,000, whereas the gas-powered truck will cost $17,500. The cost of capital that applies to both investments is 12%. The life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric-powered truck will be $6,290 per year and those for the gas-powered truck will be $5,000 per year. Annual net cash flows include depreciation expenses.

Question A. Are the projects Independent or Mutually Exclusive

Question B. Calculate the NPV

Question C. Calculate the Payback Period

Question D. Calculate IRR

Question E. Which project should be selected any why?

Reference no: EM132582504

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