NPVs and IRRs for Mutually Exclusive Projects

Assignment Help Financial Management

Reference no: EM13923708

Davis Industries must choose between a gas-powered and an electric powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments). The electric powered truck will cost more, but 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. Calculate the NPV and IRR for each type of truck and decide which is recommended.

SHOW ALL WORK AND FORMULAS TO SUPPORT ANSWERS

Reference no: EM13923708

Questions Cloud

What is the initial vertical velocity of the cannon ball : The cannonball comes to a stop in 0.05750 s. What is the magnitude of the average force that the cannonball applies on the castle wall during the collision? ?N

Costs associated with mismanaged organizational stress : Distrust, disrespect, and animosity pertain to which component of indirect costs associated with mismanaged organizational stress?

Design a tube and shell heat exchanger for the fluids : Design a tube and shell heat exchanger for the fluids and duty given for you and complete Project Management tasks -

Two major issues involved with acquiring systems : Discuss two major issues involved with acquiring systems and two major issues commonly faced when maintaining them. Address how each can be minimized or overcome.

NPVs and IRRs for Mutually Exclusive Projects : Davis Industries must choose between a gas-powered and an electric powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments)...

Unit in variable costs and unit in fixed costs : A company has $6.70 per unit in variable costs and $3.40 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.58, what price should be charged if 67,000 units are expected to be sold?

Compute the mean deviation of the probability distribution : Determine the probability 3 or more of these vehicles require warranty service.

What are similarities between forward and futures contracts : What are the similarities and differences between forward and futures contracts? What do the payoff and profit diagrams look like for forward and futures contracts?

What are the characteristics of a binary tree : What are the characteristics of a binary tree? Define the left child of node n in a binary tree. What are the three properties of each node n in a binary search tree

User Account

All Pages