1)Find the IRR of the difference between the base alternative and the second-cho

Question

1)Find the IRR of the difference between the base alternative and the second-choice alternative:

IRR ( II - III ) = ??% (Round to one decimal place.)

2)Find the IRR of the difference between the current base alternative and the third-choice alternative:

IRR ( ?? - ?? ) = ??% (Round to one decimal place.)

3)Which alternative should be chosen?

A. Alternative I

B. Alternative II

C.Alternative III

A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. At EOY 10, alternative IlI would be replaced with another alternative ll, having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should be chosen? Use the incremental IRR procedure Installed cost Net annual revenue Salvage value Useful life Calculated IRR $40,000 $30,000 $20,000 $6,500$5,600 $5,300 20 years 15.3% 20 years 18.0% 10 years 23.2% Which alternative would you choose as a base? Choose the correct answer below. A. Alternative l B. Alternative l c.Alternative II Find the IRR of the difference between the base alternative and the second-choice alternative IRR (| |-| )-| %. (Round to one decimal place.)

Explanation / Answer

1) first we have convert alternative 3 irr in the view of similar time duration.

IRR 3 = 23.2%/2 = 11.6%

the IRR of the difference between the base alternative and the second-choice alternative:

IRR ( II - III ) = 18% - 11.6% = 6.4%

2)change in IRR will be zero because cost and revenue are same and useful life when it replaced.

3)we choose alternative 3

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.