Project P has an initial cost of $50,000 and has a rate of return of 21%. Projec

Question

Project P has an initial cost of $50,000 and has a rate of return of 21%. Project Q has an initial cost of $60,000 and has a rate of return of 18%. Which of the following statements is true for the incremental rate of return for the $10,000 difference in cost of these projects.

a) The incremental rate of return is less than 18%

b) The incremental rate of return is more than 21%

c) The incremental rate of return is between 18% and 21%

d) The incremental rate of return is unknown from the given information

Explanation / Answer

Answer will be d.

MARR which is minimum acceptable rate of return is not provided for comparison.

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