Question1 5 pts The cash flows for three mutually exclusive

Question1 5 pts The cash flows for three mutually exclusive alternatives are given in the table below. Determine the AIRR for alternative A and alternative C. MARR 4%. Round your answers to 2 decimal place. Alt. A Alt. B Alt. C Initial cost $11,000 27,000 24,000 Annual benefits $3,500 7,600 6,500 Life in years 1.88 3.47 4.97 2.57

Solution

Answer is 4.97%

Incremental Investment =24000-11000=13000

Incremental Benefit =6500-3500=3000

At IRR NPV =0

0=-3000+13000*(PVIFA Year 5)

3000/13000=PVIFA Year 5

.23077=(1-(1+r)^-5)/r

solving for r we get

IRR =4.97

or using Excel

=rate(5,3000,-13000,0,0)

=4.97%