Paper

Robert Rosado

Managerial Finance

April 1st 2012

Week 5 Homework

(10–8)

NPVs, IRRs, and MIRRs for Independent Project

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 $17,100 and that for the pulley system is $22,430. The firm’s cost of capital is 14%. 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 |

Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept–reject decision for each.

Cash out lay for the tuck $17,100

Cash out lay Pulley system is $22,430

Cost of capital is 14%.

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|cost of capital |

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|14% |

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