Question2 1 pts A firm is considering three mutually exclusive alternatives as p

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Question2 1 pts A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing with another alternative C having the same installed cost and net annual revenues. MARR - 10%, which alternative should be chosen on the basis of an IRR a manufacturing process. At EOY 10, alternative C would be replaced Installed Cost S40,000 $30,000 $20,000 Net Annual Revenue 6,400 5,650$,250 Useful life (years) 20 20 10 IRR 15.0% 18.2% 229% O Alternative A O Alternative B O Alternative C O None

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Year A B C Incremental B over C Incremental A over B 0 -40000 -30000 -20000 -10000 -10000 1 6400 5650 5250 400 750 2 6400 5650 5250 400 750 3 6400 5650 5250 400 750 4 6400 5650 5250 400 750 5 6400 5650 5250 400 750 6 6400 5650 5250 400 750 7 6400 5650 5250 400 750 8 6400 5650 5250 400 750 9 6400 5650 5250 400 750 10 6400 5650 -14750 20400 750 11 6400 5650 5250 400 750 12 6400 5650 5250 400 750 13 6400 5650 5250 400 750 14 6400 5650 5250 400 750 15 6400 5650 5250 400 750 16 6400 5650 5250 400 750 17 6400 5650 5250 400 750 18 6400 5650 5250 400 750 19 6400 5650 5250 400 750 20 6400 5650 5250 400 750 IRR 11.3% 4.22% =IRR(value 0 to 20) Since Incremental IRR for B over C is more than MARR of 10%, Project B is selected between B and C Now make another step for A over B Since Incremental IRR for A over B is 4.2%, Project A is rejected , and project B should be finally selected. Ans is Alternative B

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