Sorry for the repost, the information did not enter properly... The following ca

Question

Sorry for the repost, the information did not enter properly...

The following cash flows represent two mutually exclusive investment alternatives:

a. Find the IRR (Internal Rate of Return) on the incremental cash flow. For an MARR (Minimal Acceptable Rate of Return) of 15%, which one would you select?

b. Calculate the present worth on total investment for MARR = 12%(Minimal Acceptable Rate of Return)

c. Calculate the present worth on incremental investment for the same MARR (Minimal Acceptable Rate of Return) and select the best alternative.

PLEASE SHOW ALL WORK AND EQUATIONS USED TO GET FINAL ANSWERS, THANK YOU!

Explanation / Answer

a. IRR for A1 -18000 + 10000/(1+r) +9000/(1+r)^2 +9000/(1+r)^3 +9000/(1+r)^4 + 9000/(1+r)^5 =0 IRR =43.45% IRR for A2 -23500 + 15000/(1+r) +13500/(1+r)^2 +13500/(1+r)^3 +13500/(1+r)^4 + 16500/(1+r)^5 =0 IRR =53.80% I would select A2 b. NPV of A1 =-18000 + 10000/(1+12%) +9000/(1+12%)^2 +9000/(1+12%)^3 +9000/(1+12%)^4 + 9000/(1+12%)^5 =15335.84296 NPV of A2=-23500 + 15000/(1+12%) +13500/(1+12%)^2 +13500/(1+12%)^3 +13500/(1+12%)^4 + 16500/(1+12%)^5 = 28206.045 c. I would select Project A2

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