the migration of Asian of carp into the grat lakes must be stopped. Two mutually
ID: 2496380 • Letter: T
Question
the migration of Asian of carp into the grat lakes must be stopped. Two mutually exclusive alternatives with useful lives of three years have been proposed to keep the carp from travelling further north.
Initial investment
Annual benefits
less expenses
If the MARR IS12% which alternatives should be chosen if it is specified that the internal that the internal rate-of- return method must be utilized?(6.4)
Fish Nets Electricc BarriersInitial investment
Annual benefits
less expenses
$1,000,000 $2,000,000 EOY 1 $600,000 $1,200,000 EOY 2 $500,000 $1,500,000 EOY 3 $500,000 $0Explanation / Answer
Fish Nets:
Internal rate of return = -1,000,000 + 600,000 / (1.12)^1 + 500,000 / (1.12)^2 + 500,000 / (1.12)^3
IRR = - 1,000,000 + 535,714.28 + 398,596.93 + 356125.35 = $290,436.56
Electric Barriers:
Internal rate of return = -2,000,000 + 1,200,000 / (1.12)^1 + 1,5000,000 / (1.12)^2
IRR = -2,000,000 + 1,071,428.57 + 1,195,790.81
IRR = $267,219.38.
Since the IRR is higher in Fish Nets, this alternative should be chosen.
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