Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. 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

image text in transcribed
3. 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 $12,500. The cost of capital that applies to both investments is 11%. The life cycle 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 $6,200 per year and those for the gas-powered truck will be $3,500 per year. Annual net cash flows include depreciation expenses. Calculate the NPV and IRR for each type of truck and decide which to recommend

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Private Capital Investing The Handbook Of Private Debt And Private Equity

Authors: Roberto Ippolito

1st Edition

1119526167, 978-1119526162

More Books

Students also viewed these Finance questions