Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems, Year System 1 System 2 0 -$14,800 -$45,662 1 15,037 32,200 2 15,037 32,200 3 15,037 32,200 Compute the IRR for both production system 1 and production system 2. (Round answers to 2 decimal places, e.g. 15.25.) a). IRR of system 1 is __% and IRR of system 2 is ___% b).Which has the higher IRR, System 1 or System 2? c). Compute the NPV for both production system 1 and production system 2. (Round answers to 2 decimal places, e.g. 15.25 or 15.25%.) NPV of system 1 is $ ____ and NPV of system 2 is ____ d). Which production system has the higher NPV? System 1 or System 2?
Problem 10.24
Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems,
Year System 1 System 2
0 -$14,800 -$45,662
1 15,037 32,200
2 15,037 32,200
3 15,037 32,200
Compute the
a). IRR of system 1 is __% and IRR of system 2 is ___%
b).Which has the higher IRR, System 1 or System 2?
c). Compute the
NPV of system 1 is $ ____ and NPV of system 2 is ____
d). Which production system has the higher NPV? System 1 or System 2?
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