Two mutually exclusive alternatives are being considered. Alternative A has an i

Question

Two mutually exclusive alternatives are being considered. Alternative A has an initial cost of $100 and uniform annual benefit of $19.93. The useful life is 10 years, and the IRR is 15% Alternative B has an initial cost of $50 and uniform annual benefit of $11.93. The useful life is 10 years, and the IRR is 20% The MARR is 8% Which of the following equation(s) will solve for the IRR that allows you to make a correct decision based on rate of return analysis? PW(A) = -100 + 19.93(P/A, i*, 10) PW(theta) = -50 + 11.93(P/A, i*, 10) PW(A) = -100 + 19.93(P/A, 8%, 10) PW(B) = -50 + 19.93(P/A, 8%, 10) PW = -50-8(P/A, i*, 10) PW = 50 + 8(P/A, i*, 10) PW = -50 + 8(P/A, i*, 10) PW = 50 + 8(P/A, 8%, 10) PW(A) = 100 - 19.93(P/A, i*, 10) PW(A) = 50 - 11.93(P/A, i*, 10) PW(A) = 100 - 19.93(P/A, 8%, 10) PW(A) = 50 - 11.93(P/A, 8%, 10) Choose Alternative B, since the IRR is the largest. Choose both Alternative A and B, since IRR is greater than the MARR.

Explanation / Answer

Ans) Year A B B - A

0 -100 -50 -50

1-10 19.93 11.93 8.00

Computed ROR 15% 20% X

X = PW = -50 + 8(P/A ,i* ,10)   

i.e, 5th option

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