Question

Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving material in its factory. Since 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 $22,000, whereas the gas-powered truck will cost $17,500. The cost of capital that applies to both investments is 12%. The life for each type of truck is estimated ,to be 6 years during which time the net cash flows for the electric-powered truck will be $6,920 per year and those for the gas powered truck will be $5,000 per year. Annual net cash flows include depreciation expenses. Do a sensitivity analysis comparing the NPV to the cost of capital ranging from 0-20%

Answer 1

Answer:

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