Question

Consider the following two mutually exclusive alternatives for reclaiming a deteriorating​ inner-city neighborhood​ (one of them must be​ chosen). Notice that the IRR for both alternatives is 27.18​%.

a. If MARR is 15​% per​ year, which alternative is​ better?

b. What is the IRR on the incremental cash flow​ [i.e.,Upper Δ​(Y−X​)]?

c. If the MARR is 27.5​% per​ year, which alternative is​ better?

d. What is the simple payback period for each​ alternative?

EOY	x	y
0	-$100,000	-$100,000
1	$45,000	$0
2	$49,000	$0
3	$70,606	$205,711
IRR	27.18%	27.18%

a. The PW of the alternative X is ​$________(Round to the nearest​ hundreds.)

The PW of the alternative Y is ​$__________​(Round to the nearest​ hundreds.)

Which alternative is​ better? Choose the correct answer below.

Alternative Y or Alternative X

b. The IRR on the incremental cash flow is ________​%.​(Round to two decimal​ places.)

c. The PW of the alternative X is ​$_____________. ​(Round to the nearest​ dollar.)

The PW of the alternative Y is ​$_____________.​(Round to the nearest​ dollar.)

Which alternative is​ better? Choose the correct answer below.

Alternative Y or Alternative X

d. The simple payback for the alternative X is ___ years. ​(Round up to the nearest whole​ number.)

The simple payback for the alternative Y is ___ years. ​(Round up to the nearest whole​ number.)

Answer 1