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Garner Financials is considering a new piece of equipment, a mainframe and an internet based data storage system, in this year's capital budget. The projects are mutually exclusive. The cash outlay for the mainframe is $25,400 and for the internet based storage system is $28,250. Each piece of equipment has an estimated life of 5 years. The annual after tax cash flows expected to be provided by the mainframe are $9,250 for years 1 and 2 and $5,210 for years 3, 4 and 5. The annual after tax cash flows for the internet based storage system are $1,500 for years 1 and 2 and $13,210 for years 3,4, and 5. The firm's required rate of return is 9%. find out the IRR and the NPV for each project and indicate which project should be accepted and why.

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  • Category:- Basic Finance
  • Reference No.:- M939345

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