FM11 23 - forklift system is($838,834 Thus the forklift...

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Answers and Solutions: 11 - 23 Now, MIRR is that discount rate which forces the PV of the TV of $31,578,000 over 2 years to equal $23,636,688.21: $23,636,688.21 = $31,578,000(PVIF r,2 ). Yes. The MIRR method leads to the same conclusion as the NPV method. Reject the project if r = 8%, which is greater than the corresponding MIRR of 7.61%, and accept the project if r = 14%, which is less than the corresponding MIRR of 15.58%. 11-20 a. The IRRs of the two alternatives are undefined. To calculate an IRR, the cash flow stream must include both cash inflows and outflows. b. The PV of costs for the conveyor system is ($911,067), while the PV of costs for the
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Unformatted text preview: forklift system is ($838,834). Thus, the forklift system is expected to be ($838,834) - ($911,067) = $72,233 less costly than the conveyor system, and hence the forklift trucks should be used. Financial calculator solution: Input: CF = -500000, CF 1 = -120000, N j = 4, CF 2 = -20000, I = 8, NPV C = ? NPV C = -911,067. Input: CF = -200000, CF 1 = -160000, N 1 = 5, I = 8, NPV F = ? NPV F = -838,834. 11-21 a. Payback A (cash flows in thousands): Annual Period Cash Flows Cumulative 0 ($25,000) ($25,000) 1 5,000 (20,000) 2 10,000 (10,000) 3 15,000 5,000 4 20,000 25,000 Payback A = 2 + $10,000/$15,000 = 2.67 years....
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