Joyful Company has to decide between a gas-powered and an electric-powered forklift. The company will buy only one forklift. The gas-powered forklift costs $17,500 and has cash flows of $5,000 per year for 6 years. The electric-powered forklift will cost $22,000 and has cash flows of $6,290 per year for 6 years. The cost of capital is 11%.

Calculate the NPV and the IRR for each forklift. Which one should the company select? Why?

0 1 2 3 4 5 6

Gas -17,500 5,000 .. 5,000

Electric -22,000 6,290 .. 6,290

Calculate the PI for each forklift. Which one should the company select? Why?

The NPV is better method than the IRR. Do you agree or disagree? Why?

The IRR is a better method than the NPV. Do you agree or disagree? Why?