Homework SourseThere are four projects being considered with the following
There are four projects being considered with the following cash flows in years: The MARR for the company is 12%.
Which project should be selected using incremental IRR as the figure of merit?
Solution
Year
Project 1
Project 2
Project 3
Project 4
0
(5,000)
(4,000)
(4,200)
(3,000)
1
1,000
4,000
3,000
2,200
2
3,000
6,000
2,000
3,200
3
4,000
3,000
3,000
4,100
4
3,000
4,000
5
2,000
1,000
6
2,000
1,000
IRR
41.17%
96.03%
59.18%
77.12%
Rank
IV
I
III
II
All Projects are Profitable if they independent ,if it is mutually exclusive then the project 2 is more profitable
| Year | Project 1 | Project 2 | Project 3 | Project 4 |
| 0 | (5,000) | (4,000) | (4,200) | (3,000) |
| 1 | 1,000 | 4,000 | 3,000 | 2,200 |
| 2 | 3,000 | 6,000 | 2,000 | 3,200 |
| 3 | 4,000 | 3,000 | 3,000 | 4,100 |
| 4 | 3,000 | 4,000 | ||
| 5 | 2,000 | 1,000 | ||
| 6 | 2,000 | 1,000 | ||
| IRR | 41.17% | 96.03% | 59.18% | 77.12% |
| Rank | IV | I | III | II |
