Question
Another company, Davis Industries is choosing between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the
Another company, Davis Industries is choosing 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 i.e., they are mutually exclusive investments. The cost of capital is 10%. The director of capital budgeting has provided the expected cash flows of the machines as follows:
| Expected Net Cash Flows | ||
| Year | Machine A | Machine B |
| 0 | ($50,000) | ($50,000) |
| 1 | 25,000 | 15,000 |
| 2 | 20,000 | 15,000 |
| 3 | 10,000 | 15,000 |
| 4 | 5,000 | 15,000 |
| 5 | 5,000 | 15,000 |
- Calculate the payback period and profitability index for each machine.
- Calculate net present value (NPV) and internal rate of return (IRR) for each machine.
- Using the NPV technique, which machine should be recommended?
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Ziglar On Selling The Ultimate Handbook For The Complete Sales Professional
Authors: Zig Ziglar
1st Edition
0785288937, 978-0785288930
