Respuesta :
Answer:
Electric powered truck:
NPV = $5,923.19
IRR = 22.43
Gas powered truck
NPV = $428.73
IRR = 13.85%
The electric powered truck would be chosen because it has the higher NPV and IRR
Explanation:
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
the net present value is the present value of after tax cash flows from an investment less the amount invested.
The IRR and NPV can be calculated using a financial calculator;
For the gas powered truck :
Cash flow in year 0 = $-17,960
Cash flow each year from year one to six = $4,600
I = 13%%
NPV = $428.73
IRR = 13.85%
For the electric powered truck:
Cash flow in year 0 = $-21,500
Cash flow each year from year one to six = $6,860
I = 13%%
NPV = $5,923.19
IRR = 22.43
The electric powered truck would be chosen because it has the higher NPV and IRR
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
To find the IRR using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
I hope my answer helps you
Answer:
The fact that electric-powered forklift truck has a higher NPV and IRR means that it is more profitable and more value-adding, hence, the electric-powered forklift truck is highly recommended
Explanation:
The net present value of a project is the present value of its future cash flows discounted at the required rate of return of 13%.
The present value of each future cash flow can be determined as the future value multiplied by the discount factor
PV=FV*1/(1+r)^N
which can be rewritten thus:
PV=FV/(1+r)^N
FV=future cash flow
r=discount rate=13%
N=the year of cash flow(1 for year 1 cash flow,2 for year 2 cash flow and so on)
gas-powered forklift truck:
NPV=$4,600/(1+13%)^1+$4,600/(1+13%)^2+$4,600/(1+13%)^3+$4,600/(1+13%)^4+$4,600/(1+13%)^5+$4,600/(1+13%)^6-$17,960
NPV=$428.73
electric-powered forklift truck:
NPV=$6,860/(1+13%)^1+$6,860/(1+13%)^2+$6,860/(1+13%)^3+$6,860/(1+13%)^4+$6,860/(1+13%)^5+$6,860/(1+13%)^6-$21,500
NPV=$5,923.19
The internal rate of return is the discount rate at which the the present value of future cash flows is the same as the initial investment outlay, in essence, at IRR,NPV is zero
The IRR can be determined using excel IRR as shown below:
=IRR(values)
the values are the cash flows beginning with initial investment(negative cash flow) followed by future cash flows in subsequent years
Find attached
