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    Evaluating Independent Projects

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    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

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    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.