Question
X Co. is considering replacing two pieces of equipment, a truck and an overhead pulley system, in this years capital budget. The projects are independent.
X Co. is considering replacing two pieces of equipment, a truck and an overhead pulley system, in this years capital budget. The projects are independent. The cash outlay for the truck is $ 15,200 and that for the pulley system is $ 20,000. The firms cost of capital is 14%. After-tax cash flows, including depreciation are as follows:
Year Truck Pulley
1 $ 5,300 $ 7,500
2 5,300 7,500
3 5,300 7,500
4 5,300 7,500
5 5,300 7,500
Calculate the IRR, NPV and the MIRR for each project, and indicate the accept-reject decision in each case.
Please show your solution to the problem step by step.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started