Gas-powered and an electric-powered forklift truck

Assignment Help Financial Management

Reference no: EM13933388

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 $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 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 and IRR for each type of truck, and decide which to recommend.

Please include formulas!

Reference no: EM13933388

Questions Cloud

Identify and explain effects of european expansion on asia : Identify and explain the effects of European expansion on Asia, Europe, the Americas, Africa and the world. How do these compare to the consequences of Chinese expansion

A firm should never undertake an investment : A firm should never undertake an investment if accepting it would increase the firm’s cost of capital. A particular project might have highly volatile forecasted cash flows, yet not have high market risk. If a company uses the same discount rate to e..

Consequence of developments in the disciplines : Social theory and various social work practice frameworks are in part a consequence of developments in the disciplines which have traditionally informed social work practice; philosophy, psychology, sociology and social work theorising. It is also..

Estimate that the investments will produce net cash flows : Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:

Gas-powered and an electric-powered forklift truck : 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.

How did bacon rebellion factor into this process : Why did indentured servants (black and white) become less common as English colonies developed in the late 1600s? How did Bacon's Rebellion factor into this process

Record each event in a horizontal statements model : Record each event in a horizontal statements model like the following one. The first event is rcorded as anexample

Contractual hedges are forward contracts and options : Two primary contractual hedges are forward contracts and options. Please define and explain each of the above hedges. (B) Assume the following: LC Exposure = 10,000; Spot Rate = $1.00/LC1.00; 1 Year Forward = $0.98/LC1.00; 1 Year Strike Price = $0.97..

What is it worth of the european call option : You own a one-year call option to buy one acre of Los Angeles real estate. The exercise price is $2.12 million, and the current, appraised market value of the land is $1.82 million. You have a European call option. What is it worth of the European ca..

User Account

All Pages