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Problem 12-9 NPVs and IRRs for Mutually Exclusive Projects Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in
Problem 12-9 NPVs and IRRs for Mutually Exclusive Projects Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $21,000, whereas the gas-powered truck will cost $17,230. The cost of capital that applies to both investments is 11% The life for both types of truck is estimated to be 6 years during wn time the net cash ows for he electric po were ruck will be 00 per ear and those for the gas-powered truck will be $5,300 per year. Annual net cash flows include depreciation expenses a. Calculate the NPV for each type of truck. Round your answers to the nearest dollar. Electric-powered truck Gas-powered truck b. Calculate the IRR for each type of truck. Round your answers to two decimal places. Electric-powered truck Gas-powered truck Which type of the truck should the firm purchase
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