Question

.

NEED ANSWER ASAP / ANSWER NEVER USED BEFORE

a.)

NPV

A project has an initial cost of $60,000, expected net cash inflows of $11,000 per year for 9 years, and a cost of capital of 10%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.

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b.)

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 $23,000, whereas the gas-powered truck will cost $17,100. 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 which time the net cash flows for the electric-powered truck will be $6,500 per year, and those for the gas-powered truck will be $4,750 per year. Annual net cash flows include depreciation expenses. Calculate the NPV and IRR for each type of truck, and decide which to recommend. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places.

	Electric-powered forklift truck		Gas-powered forklift truck
NPV	$		$
IRR	%		%

The firm should purchase -Select-electric-poweredgas-poweredItem 5  forklift truck.

c.)

NPVs, IRRs, and MIRRs for Independent Projects

Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $19,000, and that for the pulley system is $20,000. The firm's cost of capital is 12%. After-tax cash flows, including depreciation, are as follows:

Year	Truck		Pulley
1	$5,100		$7,500
2	5,100		7,500
3	5,100		7,500
4	5,100		7,500
5	5,100		7,500

Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any.

	Truck			Pulley
	Value			Value	Decision
IRR	%	-		%	-
NPV	$			$
MIRR	%	-		%	-

Answer 1

Part (a):
Calculation of Project's NPV
Year	Cashflows	Discounting Factor @10%	Discounted Cashflows
0	-60000	1	-60000
1	11000	0.909090909	10000
2	11000	0.826446281	9090.90909
3	11000	0.751314801	8264.46281
4	11000	0.683013455	7513.14801
5	11000	0.620921323	6830.13455
6	11000	0.56447393	6209.21323
7	11000	0.513158118	5644.7393
8	11000	0.46650738	5131.58118
9	11000	0.424097618	4665.0738
Net Present Value of Project	3349.26

Part (b):
Year	Gas powered forklift truck	Electric powered forklift truck
Cashflows	Discount Factor@11%	Discounted Cashflows	Cashflows	Discount Factor@11%	Discounted Cashflows
0	-17100	1	-17100	-23000	1	-23000
1	4750	0.900900901	4279.27928	6500	0.900900901	5855.855856
2	4750	0.811622433	3855.20656	6500	0.811622433	5275.545816
3	4750	0.731191381	3473.15906	6500	0.731191381	4752.743978
4	4750	0.658730974	3128.97213	6500	0.658730974	4281.751332
5	4750	0.593451328	2818.89381	6500	0.593451328	3857.433632
6	4750	0.534640836	2539.54397	6500	0.534640836	3475.165435
NPV			2995.05481			4498.496049
IRR			17%			18%
Both the NPV and IRR of Electric Powered forklift truck is higher.
Hence Electric Powered forklift truck can be purchased

Part (c ):
Year	Truck	Pulley
Cashflows	Discount Factor@12%	Discounted Cashflows	Cashflows	Discount Factor@12%	Discounted Cashflows
0	-19000	1	-19000	-20000	1	-20000
1	5100	0.892857143	4553.57143	7500	0.892857143	6696.428571
2	5100	0.797193878	4065.68878	7500	0.797193878	5978.954082
3	5100	0.711780248	3630.07926	7500	0.711780248	5338.351859
4	5100	0.635518078	3241.1422	7500	0.635518078	4766.385588
5	5100	0.567426856	2893.87696	7500	0.567426856	4255.701418
6	5100	0.506631121	2583.81872	7500	0.506631121	3799.733409
NPV			1968.17735			10835.55493
IRR			15.59%			29.58%
MIRR			13.86%			20.38%
	Truck Value	Pulley value	Decision
NPV	1968.17735	10835.55493	Pulley
IRR	15.59%	29.58%	Pulley
MIRR	13.86%	20.38%	Pulley