1. NPV

A project has an initial cost of $75,000, expected net cash inflows of $15,000 per year for 10 years, and a cost of capital of 12%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.

2. 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 $22,000, whereas the gas-powered truck will cost $17,500. The cost of capital that applies to both investments is 12%. 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 $6,290 per year, and those for the gas-powered truck will be $5,000 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 -Select-electric-poweredgas-poweredItem 5 forklift truck.

3.

RR

A project has an initial cost of $50,000, expected net cash inflows of $11,000 per year for 9 years, and a cost of capital of 10%. What is the project's IRR? Round your answer to two decimal places.

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