NPVs, IRRs, and MIRRs for Independent Projects Edelman Engineering is considerin

Question

NPVs, IRRs, and MIRRs for Independent Projects

Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $19,000, and that for the pulley system is $20,000. The firm's cost of capital is 12%. After-tax cash flows, including depreciation, are as follows:

Calculate the IRR for each project. Round your answers to two decimal places.

Truck:  %

What is the correct accept/reject decision for this project?
-Select-AcceptRejectItem 2

Pulley:  %
What is the correct accept/reject decision for this project?
-Select-AcceptRejectItem 4

Calculate the NPV for each project. Round your answers to the nearest dollar, if necessary. Enter each answer as a whole number. For example, do not enter 1,000,000 as 1 million.

Truck: $   
What is the correct accept/reject decision for this project?
-Select-AcceptRejectItem 6

Pulley: $   
What is the correct accept/reject decision for this project?
-Select-AcceptRejectItem 8

Calculate the MIRR for each project. Round your answers to two decimal places.

Truck:  %
What is the correct accept/reject decision for this project?
-Select-AcceptRejectItem 10

Pulley:  %
What is the correct accept/reject decision for this project?

Year Truck Pulley 1 $5,100 $7,500 2 5,100 7,500 3 5,100 7,500 4 5,100 7,500 5 5,100 7,500

Explanation / Answer

Year Truck Pulley 0 (19,000) (20,000) 1 to 5        5,100        7,500 PV annuity factor 12%        3.605        3.605 PV of cash inflow     18,384     27,036 NPV         (616)        7,036 Decision reject accept PV annuity factorTruck - 11%, pulley 25%     3.6960     2.6890     18,850     20,168 IRR 11% 25% Decision reject accept

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