Question: Olsen Engineering is considering including two pieces of equipment a truck
Olsen 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 $22,430, and for the pulley system it is $17,100. Each piece of equipment has an estimated life of five years. The annual after-tax cash flow expected to be provided by the truck is $7,500, and for the pulley it is $5,100. The firm’s required rate of return is 14 percent. Calculate the NPV, IRR, MIRR, PB, and DPB for each project. Indicate which project(s) should be accepted.
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