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Compute the irr for both production systems

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Question - Sunland Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for production systems.

Year

System 1

System 2

0

-$12,110

-$46,246

1

12,299

31,390

2

12,299

31,390

3

12,299

31,390

Compute the IRR for both production system 1 and production system 2.

Which has the higher IRR?

Compute the NPV for both production system 1 and production system 2.

Which production system has the higher NPV?

Reference no: EM133167230

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