Question

Problem 10-8
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 $15,000, and that for the pulley system is $21,000. The firm's cost of capital is 11%. After-tax cash flows, including depreciation, are as follows:

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

1. 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

2. 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

3. 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?
   -Select-AcceptRejectItem 12

Answer 1

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