For the following table, assume a MARR of 9% per year and a useful life for each

Question

For the following table, assume a MARR of 9% per year and a useful life for each alternative of six years that equals the study period. The rank-order of alternatives from least capital investment to greatest capital investment is Do Nothing A C B. Complete the IRR analysis by selecting the preferred alternative Do Nothing A A C Capital investment Annual revenues Annual costs Market value IRR - $15,000 4,000 - 1,000 6,000 12.7% - $2,000 900 - 150 -2,220 10.5% - $3,000 470 -75 3,400 The IRR of (C B) is 96 (Round to one decimal place )

Explanation / Answer

Solution: Please see the below working to find the IRR of C->B. The same is done by finding out cash-flow from Year 0 to Year 6 and then calcluating IRR through formula/excel.

Year --> 1 2 3 4 5 6 Initial Investment -3000 Revenue 470 470 470 470 470 470 Cost -75 -75 -75 -75 -75 -75 Market Value 3400 Cash Flow -3000 395 395 395 395 395 3795 IRR 14.7%

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---