Evaluating purchasing line of cement mixing trucks

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Reference no: EM131048609

McClellan Cement is evaluating purchasing a line of cement mixing trucks. McClellan can either purchase new trucks that will produce $70,000 per year for five years, or used trucks that will produce $60,000 per year for five years. The new trucks cost $400,000 and can be sold at the end of five years for a net gain of $220,000. The used trucks cost $200,000 and will have no value at the end of five years. Which project has the higher IRR? If the cost of capital is 5%, which project has the higher NPV? Which project should McClellan choose?

Reference no: EM131048609

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