Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $18,000, and that for the pulley system is $22,000. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1 $5,100 $7,500 2 5,100 7,500 3 5,100 7,500 4 5,100 7,500 5 5,100 7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any. Truck Pulley Value Decision Value Decision IRR % -Select-AcceptRejectItem 2 % -Select-AcceptRejectItem 4 NPV $ -Select-AcceptRejectItem 6 $ -Select-AcceptRejectItem 8 MIRR % -Select-AcceptRejectItem 10 % -Select-AcceptRejectItem 12
NPVs, IRRs, and MIRRs for Independent Projects
Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $18,000, and that for the pulley system is $22,000. The firm's cost of capital is 14%. After-tax cash flows, including
| Year | Truck | Pulley | ||
| 1 | $5,100 | $7,500 | ||
| 2 | 5,100 | 7,500 | ||
| 3 | 5,100 | 7,500 | ||
| 4 | 5,100 | 7,500 | ||
| 5 | 5,100 | 7,500 |
Calculate the
| Truck | Pulley | ||||
| Value | Decision | Value | Decision | ||
| IRR | % | -Select-AcceptRejectItem 2 | % | -Select-AcceptRejectItem 4 | |
| NPV | $ | -Select-AcceptRejectItem 6 | $ | -Select-AcceptRejectItem 8 | |
| MIRR | % | -Select-AcceptRejectItem 10 | % | -Select-AcceptRejectItem 12 |
Independent projects are those that do not depend on the other projects to be selected and the funding of the project also do not depend on the other existing or new projects.
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