Isaac Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. The firm will choose only one because both forklifts perform the same function. (They are mutually exclusive investments.) The electric-powered truck will cost more but 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 18%. The life for both types of truck is estimated to be six years, during which time the net cash flows for the electric- powered truck will be $7,290 per year, , and those for the gas-powered truck will be $6,000 per year. Annual net cash flows include depreciation expenses. Calculate the NPV and IRR for each type of truck and decide which to recommend. 1. Compute the NPV for each truck. 2. Compute the IRR for each truck. 3. Compute the crossover rate. 4. Compute the payback period for each truck. 5. Compute the profitability index for each truck. Year Use the data below for problems 6 to 10. Proj Y ($420,000) Proj Z ($420,000) 400,000 182,000 185,000 156,000 146,000 175,000 01234 Page 1 of 3 535 words English (United States) The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have an 11% cost of capital. 6. What is each project's initial NPV without replication? 7. What is each project's equivalent annual annuity? 8. Now apply the replacement chain approach to determine the shorter projects' extended NPV. Which project should be chosen? 9. Now assume that the cost to replicate Project Y in 2 years will increase to $600,000 because of inflationary pressures. How should the analysis be handled now, and which project should be chosen? Focus I T + 120%