Question

Consider the following two mutually exclusive alternatives: A B 0 -$18,000 -$21,100 1 $7,500 $6,000 2...

Consider the following two mutually exclusive alternatives:

A

B

0

-$18,000

-$21,100

1

$7,500

$6,000

2

$7,800

$14,000

3

$6,650

$7,000

Determine the IRR on the incremental investment.

If the firm’s MARR is 18%, which alternative is the better choice?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:-

To Calculate Incremental IRR-

Incremental IRR = 22.46%

IF Incremental IRR(22.46%) is greater than MARR(18%). then we choose Project B.

If you have any query related to question then feel free to ask me in a comment.Thanks. Please rate.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following two mutually exclusive alternatives for reclaiming a deteriorating​ inner-city neighborhood​ (one of them...
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...
The following data have been estimated for two mutually exclusive investment alternatives, A and B. Incremental...
The following data have been estimated for two mutually exclusive investment alternatives, A and B. Incremental ROR analysis was perform to select more desirable alternative. If MARR = 12%, the value of incremental cash flow for year 3 is: A B Capital Investment -8000 -13000 Annual Cash Flow -3500 -1600 Salvage Value 0 2,000 Useful life 5 5 -$1900 +$1900 -$3,500 +$3,500
"A manufacturing firm is considering two mutually exclusive alternatives given below. The net cash flows in...
"A manufacturing firm is considering two mutually exclusive alternatives given below. The net cash flows in dollars for years 0 through 2 for Project A is: -4,200 2,500 2,100 The net cash flow in dollars for years 0 through 2 for Project B is: -7,400 4,900 5,700 Determine which project is a better choice if MARR = 11%. Enter the IRR as a percentage between 0 and 100 for the project that is a better choice. If neither project should...
Consider the following EOY cash flows for two mutually exclusive alternatives​ (one must be​ chosen). The...
Consider the following EOY cash flows for two mutually exclusive alternatives​ (one must be​ chosen). The MARR is 4​% per year. Lead Acid Lithium Ion Capital investment ​$5,000 ​$13,000 Annual expenses ​$2,250 ​$2,500 Useful life 12 years 18 years Market value at end of useful life ​$0 ​$2,600 LOADING... Click the icon to view the interest and annuity table for discrete compounding when i=4​% per year. Determine which alternative should be selected if the repeatability assumption applies. The AW of...
Consider the following mutually exclusive alternatives: Alternative A Alternative B Capital investment Net annual receipts $702,000...
Consider the following mutually exclusive alternatives: Alternative A Alternative B Capital investment Net annual receipts $702,000 $123,550 $1,656,000 $276,200 Both alternatives have a useful life of 12 years and no market value at that time. The MARR is 12 % per year. Determine the annual worth (AW) of the most profitable course of action. (Enter your answer as a number without the dollar sign.)
A manufacturing firm is considering two mutually exclusive alternatives given below. The net cash flows in...
A manufacturing firm is considering two mutually exclusive alternatives given below. The net cash flows in dollars for years 0 through 2 for Project A is: -4,000 3,300 3,000 The net cash flow in dollars for years 0 through 2 for Project B is: -6,400 4,400 4,200 Determine which project is a better choice if MARR = 11%, or if neither project should be chosen.
Consider the following two mutually exclusive projects: Year Project A Project B 0 -180,000 -18,000 1...
Consider the following two mutually exclusive projects: Year Project A Project B 0 -180,000 -18,000 1 60,000 15,000 2 100,000 15,000 3 150,000 12,000 Calculate the internal rate of return, and net present value. Assume a discount rate of 15%. Which project should be selected?
Consider the three mutually exclusive alternatives below. At the end of their useful lives, Alternatives X...
Consider the three mutually exclusive alternatives below. At the end of their useful lives, Alternatives X and Z will be replaced with identical replacements so that a 10-year service requirement is met. If the MARR is 3% per year, which alternative (if any) should be chosen based on the annual worth method? Alt X Alt Y Alt Z Capital investment $300,000 $425,000. $500,000. Annual savings $68,750 $108,750. $188,750. Salvage value $90,000 $125,000. $140,000. Life, years 10 20 5
Consider three mutually exclusive alternatives. The MARR is 10%based on the payback period method, which alternative...
Consider three mutually exclusive alternatives. The MARR is 10%based on the payback period method, which alternative should be selected? Year             X           Y           Z 0                   -$100    -$50      -$50 1                   25          16          21 2                   25          16          21 3                   25          16          21 4                   25          16          21 Consider three mutually exclusive alternatives, each with a 20 year life span and no salvage value. The minimum attractive rate of return is 6%. A                         B                           C Initial Cost                                     $4000                 $8000                           $10,000 Uniform Annual Benefit ($)            410                    ...
No Excel. Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200...
No Excel. Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the present. However, the pattern of revenue from them is different. Alternative A has the potential to bring more revenues later in the project life. The expected revenues of alternative A are: $350, $500, and $850 by the ends of years one to three, respectively. Alternative B promises more immediate cash inflow which is expected to diminish with time: $750, $300, and $100...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT