NPV and IRR, Mutually Exclusive Projects

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

Techno Inc. intends to invest in one of two competing types of flexible manufacturing systems: FLEX-1K and FLEX-2Z. Both systems have a project life of 10 years. The purchase price of the FLEX-1K system is $9,600,000, and it has a net annual after-tax cash inflow of $2,400,000. The FLEX-2Z is more expensive, selling for $11,200,000, but it will produce a net annual after-tax cash inflow of $2,800,000. The cost of capital for the company is 12%.

Required:

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

FLEX-1K:	$fill in the blank 1
FLEX-2Z:	$fill in the blank 2

Which model would you recommend using NPV?

FLEX-1KFLEX-2ZbothneitherFLEX-2Z

2. Calculate the IRR for each project.

FLEX-1K:	10% to 20%20% to 25%25% to 30%20% to 25%
FLEX-2Z.:	10% to 20%20% to 25%25% to 30%20% to 25%

Which model would you recommend using IRR?

FLEX-1KFLEX-2ZBothNeitherBoth