Question: Horrigan Industries must choose between a gas powered and an electric powered
Horrigan Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $22,000, whereas the gas-powered truck will cost $17,500. The required rate of return that applies to both investments is 12 percent. The life for both types of truck is estimated to be six years, during which time the net cash flows for the electric-powered truck will be $6,290 per year and those for the gas-powered truck will be $5,000 per year. Calculate the NPV and IRR for each type of truck, and decide which to recommend.
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