Davis industries must choose between a gas powered and a

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Davis Industries must choose between a gas powered and a electric powered forklift truck for moving materials in its factory. Since both forklifts perform the same function , the firm will choose only one. The are mutually exclusive investments. The electric powered truck will cost more but it will be less expensive to operate. It will cost 22000 whereas the gas powered truck will cost 17500 .the cost of the capital 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 6290 per year and those the gas powred truck will be 5000 per year. Annual net cash flows include depreciation expenses. Calculate the NPV and IRR for each type of truck and decide which to recommend?

Reference no: EM13395395

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