1. Olsen Engineering is considering including two pieces of equipmenta truck and an

overhead pulley systemin this year's capital budget. The projects are independent.

The firm's required rate of return is 14 percent.

The cash outflow/cost for the truck is $22,430. This project has an estimated life of five

years. The annual flow expected to be provided by the truck is $7,500, and for the pulley,

it is $5,100.

The cash outflow/cost for the pulley system it is $17,100. This project also has an

estimated life of five years. The annual flow expected to be provided by the pulley is

$5,100 each year.

Question:

a. Calculate the NPV & IRR for each project.

b. Indicate which project(s) should be accepted.

2. Project P costs $15,000 and is expected to produce benefits (cash flows) of $4,500 per year

for five years. Project Q costs $37,500 and is expected to produce cash flows of $11,100 per

year for five years.

a. Calculate the NPV, IRR, and payback period for each project, assuming a required rate of

return of 14 percent.

b. If the projects are independent, which project(s) should be selected? If they are mutually

exclusive projects, which project should be selected?