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 vill 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. a. Calculate the NPV for each type of truck. Do not round intermediate calculations. Round your answers to the nearest dollar. Electric-powered forklift truck: $ Gas-powered forklift truck: $ b. Calculate the IRR for each type of truck. Do not round intermediate calculations. Round your ansvers to two decimal places. Electric-powered forklift truck: Gas-powered forklift truck: Which type of the truck should the firm purchase? The firm should purchase -Select- forklift truck.
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 vill 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. a. Calculate the NPV for each type of truck. Do not round intermediate calculations. Round your answers to the nearest dollar. Electric-powered forklift truck: $ Gas-powered forklift truck: $ b. Calculate the IRR for each type of truck. Do not round intermediate calculations. Round your ansvers to two decimal places. Electric-powered forklift truck: Gas-powered forklift truck: Which type of the truck should the firm purchase? The firm should purchase -Select- 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
Problem 1PS
Related questions
Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
Transcribed Image Text: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.
a. Calculate the NPV for each type of truck. Do not round intermediate calculations. Round your answers to the nearest dollar.
Electric-powered forklift truck: $
Gas-powered forklift truck: $
b. Calculate the IRR for each type of truck. Do not round intermediate calculations. Round your two decimal places.
ansvers to
Electric-powered forklift truck:
%
Gas-powered forklift truck:
%
Which type of the truck should the firm purchase?
The firm should purchase -Select-
v forklift truck.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education