In: Finance
Mars Engineering Industries must choose between a gas-powered
and an electric-
powered generator for their factory. Both generators perform the
same function. The
electric-powered generator will cost $20,000 and the gas-powered
generator will cost
$16,500. The life of each type of generator is estimated to be 5
years during which
time the net cash flow per year for gas-powered generator will be
$5,000 and that for
electric-powered generator will be $6,500. The cost of capital for
Mars is 13%.
Calculate IRR and MIRR for each generator and decide which to
recommend.