6. Calculate incremental cash flow for the more expensive project. N (Time Perio

Question

6. Calculate incremental cash flow for the more expensive project.
N
(Time Period)
Alternative X
Cash Flow
Alternative Y
Cash Flow
Incremental
Cash Flow
0 -$100,000 -$125,000
1 25,000 30,000
2 25,000 32,000
3 30,000 35,000
4 30,000 38,000
Suggest a situation where one would need to use the incremental cash flows to evaluate the
alternatives.
7. Mutually exclusive projects, A, B, C, D, and E are ordered from least to greatest capital cost (i.e.,
capital cost of A < B < C < D < E). Determine which alternative should be selected from the
following table of IRRs and incremental IRRs if the MARR equals 10 percent. Explain how you
arrived at this selection.

Explanation / Answer

year ............incremental cash flow

0....................-25000

1...................5000

2..................7000

3....................5000

4.....................8000

incremental cash flow is useful when one wants to invest amount in a project from a set of projects

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