NPV

7. The company has to choose between buying an electric vehicle and buying a petrol vehicle to transport goods. Because both vehicles perform the same function, we have to choose only one of them (mutually exclusive investments). The electric car costs more, but the operation its less expensive. The purchase cost of the electric vehicle amounts to 17,628, while that of the petrol vehicle to 14,302. The cost of capital for both investments is 10%. The life of each vehicle is estimated at 6 years during which the cash flows of the electric vehicle will be 5,000 per year, while the gasoline vehicle 4,000 per year. Calculate the Net Present Value for each type of vehicle and decide which of the two you suggest in management of the company to be purchased.