Abbondante Multinational Inc. has to decide between a gas powered and an electric - powered forklift. The company will buy only one forklift. The gas-powered forklift costs $17,600 and has cash flows of $5,700 per year for 8 years. The electric - powered forklift will cost $ 22, 100 and has cash flows of $5,900 per year for 6 years. The cost of capital is 9.57%. Calculate the NPV and the IRR for each forklift. Which one should the company select? Why? Calculate the profitability index for both. Which one should the company select? Why?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Abbondante Multinational Inc. has to decide between a
gas powered and an electric - powered forklift. The
company will buy only one forklift. The gas - powered
forklift costs $17,600 and has cash flows of $5,700 per
year for 8 years. The electric - powered forklift will cost $
22,100 and has cash flows of $5,900 per year for 6
years. The cost of capital is 9.57%. Calculate the NPV
and the IRR for each forklift. Which one should the
company select? Why? Calculate the profitability index
for both. Which one should the company select? Why?
Transcribed Image Text:Abbondante Multinational Inc. has to decide between a gas powered and an electric - powered forklift. The company will buy only one forklift. The gas - powered forklift costs $17,600 and has cash flows of $5,700 per year for 8 years. The electric - powered forklift will cost $ 22,100 and has cash flows of $5,900 per year for 6 years. The cost of capital is 9.57%. Calculate the NPV and the IRR for each forklift. Which one should the company select? Why? Calculate the profitability index for both. Which one should the company select? Why?
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