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The Management of Blossom Manufacturing Company is evaluating two forklift systems to use in its plant that produces the towers for a windmill power farm
The Management of Blossom Manufacturing Company is evaluating two forklift systems to use in its plant that produces the towers for a windmill power farm. The costs and the cash flows from these systems are shown below. The company uses a 8 percent discount rate for all projects.
Otis Forklifts Year 0 = -$3,143,450
Year 1 = $959,225
Year 2 = $1,338,886
Year 3 = $2,091,497
Craigmore Forklifts Year 0 = -$4,157,410
Year 1 = $855,236
Year 2 = $1,745,225
Year 3 = $2,845,110
NPV
Otis forklift $552,898
Craigmore Forklifts $389,264
Compute the IRR for each of the two systems.
Otis forklift ______________%
Craigmore forklift ___________%
Expert Solution
NPV ;
Otis Forklifts = $552,898
Craigmore Forklifts = $389,264
IRR ;
Otis Forklifts = 16.31% Or 16%
Craigmore Forklifts = 12.26% Or 12%
Otis Forklifts should be purchased because the NPV & IRR is higher than the Craigmore Forklifts.
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