Question

MARR is 12%. On the basis of IRR criterion, which option is better? Alternative 1 2...

MARR is 12%. On the basis of IRR criterion, which option is better?

Alternative

1

2

3

4

First cost, $

-80,000

-50,000

-145,000

-20,000

Annual Cost

-28,000

-26,000

-16,000

-21,000

Annual revenue

61,000

43,000

51,000

29,000

Life, years

4

4

8

4
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Homework Answers

Answer #1

IRR can be calculated either by trail and error method or by excel.

Both method are explained

If solved by excel method :

MARR is 12% and IRR of Alternative 1 is maximum. Hence alternative 1 will be selected.

IF IRR calculated manually

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