Problem 680 algorithmic Question Help For the following tab

Problem 6-80 (algorithmic) Question Help * For the following table, assume a MARR of 10% per year and a useful life for each alternative of six ye from least capital investment to greatest capital investment is Do Nothing ? A ? C ? 8 Complete the IRR analysis by selecting the preferred alternative ars that equals the study period The rank order of alternatives ? Capital investment ? Annual revenues ? Annual costs A Market value ? IRR Do NothingAACCB $2.000 $3,000 470 125 3,300 72 $15,000 4,000 -1,000 6000 127% 900 -150 -2.220 3 10 5% The IRR of ? (C-Bis[IN (Round to one decimal place )

Solution

IRR of ? (C ? B)

? Capital Investment = -3,000

? Annual Revenues = 470

? Annual Costs = -125

? Market Value = 3,300

MARR = 10%, Study Period = 6 year

Calculate Net Annual Cash Flow

NACF = Annual Revenues – Annual Costs

470 – 125 = 345

Use Trial and Error Method

NPW at MARR of 10%

NPW = -3,000 + 345 (P/A, 10%, 6) + 3,300 (P/F, 10%, 6)

NPW = -3,000 + 345 (4.3553) + 3,300 (0.5645)

NPW = 365

NPW is positive, increase MARR to 13% and calculate NPW to get negative NPW

NPW at 13%

NPW = -3,000 + 345 (P/A, 13%, 6) + 3,300 (P/F, 13%, 6)

NPW = -3,000 + 345 (3.9975) + 3,300 (0.4803)

NPW = -36

Using Interpolation

IRR of ? (C ? B) = 10% + [365 – 0 / 365 – (-36) * 3 = 12.73%