8) 8) Use the folowing table to solve the four following consecutive questions 3

Question

8) 8) Use the folowing table to solve the four following consecutive questions 30.000 70.000 90 00038 000 0.000 60.000 Costs 280009 0 10 000 42 5 52000 38 000 45.000 50 000 Market Value at EOY TO 10.000 30 8 15,000 9.2 10 000 15.000 her the base aternaive has been dentfed the first comparison to be made in an incremental analyss should be D) D-C E)C-D C) B-C 9)Usng a MARR of 15% me pw of the nvestment r, A when compared rorementatytoBisainost C)-21,000 AE-D B) B-A 9) neary 8) 53000 D)-69000 ) 61,000 The IRR for alternative A is most nearly A),275 10) B)15% C) 36% D)30% E)10%

Explanation / Answer

8) Option D. The alternatives need to be arranged from increasing order of their investments. Hence Alternative D would become the base which needs to be compared with C

Year

A

B

Incremental PW (B-A)

0

-60000

-90000

-30000

1

20000

12000

-8000

2

20000

12000

-8000

3

20000

12000

-8000

4

20000

12000

-8000

5

20000

12000

-8000

6

20000

12000

-8000

7

20000

12000

-8000

8

20000

12000

-8000

9

20000

12000

-8000

10

30000

12000

-18000

IRR

32%

PW

? -72,622.00

9. Option D. from the above table it is 72,622

10. Option D, using the function = IRR(cashflow)

Year

A

B

Incremental PW (B-A)

0

-60000

-90000

-30000

1

20000

12000

-8000

2

20000

12000

-8000

3

20000

12000

-8000

4

20000

12000

-8000

5

20000

12000

-8000

6

20000

12000

-8000

7

20000

12000

-8000

8

20000

12000

-8000

9

20000

12000

-8000

10

30000

12000

-18000

IRR

32%

PW

? -72,622.00

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