Consider the following two mutually exclusive investment alternatives with given
ID: 2741792 • Letter: C
Question
Consider the following two mutually exclusive investment alternatives with given (MARR= 10%)
Year
Project A1
Project A2
0
-15,000 $
-20,000 $
1
7,500 $
8,000 $
2
7,500 $
15,000 $
3
7,500 $
5,000 $
i*
23.5 %
20 %
a) Find the best alternative of A1 and A2 based on the present worth incremental investment.
b) Find the best alternative of A1 and A2 based on the IRR incremental investment.
Year
Project A1
Project A2
0
-15,000 $
-20,000 $
1
7,500 $
8,000 $
2
7,500 $
15,000 $
3
7,500 $
5,000 $
i*
23.5 %
20 %
Explanation / Answer
Solution.
a) Find the best alternative of A1 and A2 based on the present worth incremental investment.
Best alternative of A2
b) Find the best alternative of A1 and A2 based on the IRR incremental investment.
Best alternative = A2
Year Cash flow Table value PV 0 (15,000.00) 1.0000 (15,000.00) 1 7,500.00 0.9090 6,817.50 2 7,500.00 0.8260 6,195.00 3 7,500.00 0.7510 5,632.50 PW 18,645.00 Year Cash flow Table value PV 0 (15,000.00) 1.0000 (15,000.00) 1 8,000.00 0.9090 7,272.00 2 15,000.00 0.8260 12,390.00 3 5,000.00 0.7510 3,755.00 PW 23,417.00Related Questions
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