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Davis Industries must choose between a gas- powered and an electric-Powered forklift truck for moving materials in its factory.
Davis Industries must choose between a gas- powered and an electric-Powered forklift truck for moving materials 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, wheras the gas-powered truck will cost $17,500. The cost of capital that applies to both investments is 12%. 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$6,290 per year and those for the gas-powered truck will be $5,000 per year. Annual net cash flows include depreciation expenses. Calculate the NPV andIRR for each type of truck, and decide which to recommend.
SOLUTION:Year Gas Powered Electric Power 0123456 -$17,500.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00 -$22,000.00$6,290.00$6,290.00$6,290.00$6,290.00$6,290.00...