Question
A firm is considering including two pieces of equipment, a truck and an overhead pulley system, in this years capital budget. The projects are independent.
A firm is considering including two pieces of equipment, a truck and an overhead pulley system, in this years capital budget. The projects are independent. The cash outlay for the truck is $28,000, and that for the pulley system is $35,350. The firms cost of capital is 11%. After-tax cash flows, including depreciation are as follows: Year Truck Pulley 1 $10,000 $11,500 2 $12,000 $11,000 3 $11,000 $9,500 4 $9,000 $13,000 5 $11,000 $10,500 a. Calculate the NPV for each project. (2 marks) b. Calculate the IRR for each project. (2 marks) c. Calculate the payback for each project (1 marks)
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