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Should firm buy mules or tractor

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The management of Flesher Farms is trying to decide whether to buy a new team of mules at a cost of 1,000 or a new tractor at a cost of $10,000. They will perform the same job. But because the mules require more laborers. The annual return is only $250 of net cash inflows. The tractor will return $2000 of net cash inflows per year. The mules have a working life of 8 years and a the tractor has a working life of 10 years. Neither Investment is expected to have a salvage value at the end of its useful life..Flesher Farms Desired rate of return is 6%

Question 1: Should firm buy mules or tractor?

Question 2: Compare 2 options based on NPV, IRR and Payback Approaches

Reference no: EM132518097

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