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Davis Industries must choose between a gas-powered and an electric powered forklift truck for moving materials in its factory. Both forklifts perform the same function. The electric powered track 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 for both investments is 12 percent. The life of both tracks is expected to be 6 years, during which time the cashflows 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 and IRR for each truck and decide which to recommend.

Financial Management, Finance

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  • Reference No.:- M92813577

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