Electric-powered forklift truck   Gas-powered forklift truck NPV $              $            IRR   %     %   The firm should purchase  forklift truck.

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
Section: Chapter Questions
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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.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $21,000, whereas the gas-powered truck will cost $17,230. The cost of capital that applies to both investments is 11%. 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 $6,100 per year, and those for the gas-powered truck will be $5,300 per year. Annual net cash flows include depreciation expenses. Calculate the NPV and IRR for each type of truck, and decide which to recommend. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places.

 

  Electric-powered
forklift truck
  Gas-powered
forklift truck
NPV $              $           
IRR   %     %

 

The firm should purchase  forklift truck.

 

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