For each of the following scenarios state whether an increme

For each of the following scenarios, state whether an incremental ROR analysis is required to select an alternative and state why or why not. Assume that alternative Y requires a larger initial investment than alternative X and that the MARR is 20% per year.

a) X has a rate of return of 22% per year, and Y has a rate of return of 20% per year.

b) X has a rate of return of 19% per year, and Y has a rate of return of 21% per year.

c) X has a rate of return of 16% per year, and Y has a rate of return of 19% per year.

d) X has a rate of return of 25% per year, and Y has a rate of return of 23%.

e) X has a rate of return of 20%, and Y has a rate of return of 22% per year.

Solution

Solution:-

1) a) B is better because it will be bound to pay more return on higher amount invested on alernate B relative to alternate A.

b) A is better because higher amount invested in A will give higher return compared to alternate B.