Wildhorse Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and...

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Wildhorse Incorporated management is considering investing intwo alternative production systems. The systems are mutuallyexclusive, and the cost of the new equipment and the resulting cashflows are shown in the accompanying table. The firm uses a 7percent discount rate for production systems.
Year System 1 System 2
0 -$15,080 -$47,448
1 15,294 33,300
2 15,294 33,300
3 15,294 33,300
Compute the IRR for both production system 1 and productionsystem 2. (Do not round intermediate calculations. Round answers to2 decimal places, e.g. 15.25%.)
IRR of system 1 is _____ % and IRR of system 2 is _%.
Which has the higher IRR? (System 1/ System 2)
Compute the NPV for both production system 1 and productionsystem 2. (Do not round intermediate calculations. Round answers to2 decimal places, e.g. 15.25.)
NPV of system 1 is $ and NPV of system 2 is$_____.
Which production system has the higher NPV? (System 1/ System2)

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Solution IRR of system 1 is 8554 and IRR of system 2 is See Answer

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Wildhorse Incorporated management is considering investing intwo alternative production systems. The systems are mutuallyexclusive, and the cost of the new equipment and the resulting cashflows are shown in the accompanying table. The firm uses a 7percent discount rate for production systems.Year System 1 System 20 -$15,080 -$47,4481 15,294 33,3002 15,294 33,3003 15,294 33,300Compute the IRR for both production system 1 and productionsystem 2. (Do not round intermediate calculations. Round answers to2 decimal places, e.g. 15.25%.)IRR of system 1 is _________ % and IRR of system 2 is _________%.Which has the higher IRR? (System 1/ System 2)Compute the NPV for both production system 1 and productionsystem 2. (Do not round intermediate calculations. Round answers to2 decimal places, e.g. 15.25.)NPV of system 1 is $__________ and NPV of system 2 is$___________.Which production system has the higher NPV? (System 1/ System2)