Question

Dr. Cruz is thinking about buying two types of production systems to produce Lithium batteries over 6 years: 1) a BDP system and 2) a GTT system. They produce the same number of pieces every year. On the basis of IRR criterion, which option should Dr. Cruz select? Please show all steps and work, thank you

Item	BDP	GTT
Annual O&M Costs
Annual labor cost	$1,169,600	$707,200
Annual material cost	832,320	598,400
Annual overhead cost	3,150,000	1,950,000
Annual tooling cost	470,000	300,000
Annual inventory cost	141,000	31,500
Annual income taxes	1,650,000	1,917,000
Investment	4,500,000	12,500,000
Net salvage value	$500,000	1,000,000

Answer 1