Use Rate of Return Analysis to determine whether Alternative A or B should be ch
ID: 2741593 • Letter: U
Question
Use Rate of Return Analysis to determine whether Alternative A or B should be chosen. Assume the MARR is 4% per year, compounded annually.
Use Rate of Return Analysis to determine whether Alternative A or B should be chosen. Assume the MARR is 4% per year, compounded annual Alternative A 850 200 Alternative B 1339 300 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 5 id be chosen, because the in the MARR C) Alternative B should be selected because its rate of return is 3.91%, which is less than the MARR Alternative A should be chosen, because the incremental rate of return of B-A is 0.75%, which is less than the MARR C) Alternative A should be selected because its rate of return is 5.67%, which is greater than the MARRExplanation / Answer
IRR of Alternative A (using financial calculator) = 5.67%
IRR of Alternative B (using financial calculator) = 3.91%
Thus, Alternative A should be selected because its rate of return is 5.67%, which is higher than the MARR. Option 4.
Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.