Explore BrainMass

Evaluating Independent Projects

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

Solution Summary

Using Excel functions (not formulas), the solution illustrates how to compute a project's net present value, internal rate of return, and modified internal rate of return. It also discusses how to pick among mutually exclusive projects.