NPV and IRR, Mutually Exclusive Projects

For discount factors use Exhibit 12B-1 and Exhibit 12B-2.

Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annual after-tax cash inflow of $900,000. The CAM Y model is more expensive, selling for $4,200,000, but it will produce a net annual after-tax cash inflow of $1,050,000. The cost of capital for the company is 10%.

Required:

1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar.

CAM X:	$1930113.00
CAM Y:	$_________?

Which model would you recommend using NPV? CAM Y

2. Select the IRR for each project.

CAM X: 20% - 25%

CAM Y: 20% - 25%

Which model would you recommend using IRR? Both