a) Based on the cash flows and the MARR of 10%, what is the IRR for Project A? b) Based on the cash flows, calculate the IRR for the increment from A to B. c) The table below apply to all projects (A through F). The data can be interpreted as follows: the IRR on the incremental investment from project C to D is 13%.. Which project should be selected?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Problem #4 (3/10): Six mutually exclusive projects A, B, C, D, E, and F, are being considered by XYZ.
They have been ordered by first costs so that project A has the lowest first cost, project F the
largest. Detailed cash flows for Projects A and B are given below. (MARR is 10%)
Project A: Initial Cost of $323,120. annual benefit of $50,000 for 15 years
Project B: Initial Cost of $494,310. annual benefit of $70,000 for 15 years
(a) Based on the cash flows and the MARR of 10%, what is the IRR for Project A?
(b) Based on the cash flows, calculate the IRR for the increment from A to B.
(c) The table below apply to all projects (A through F). The data can be interpreted as follows: the IRR
on the incremental investment from project C to D is 13%.. Which project should be selected?
IRR on Increments of Investment
Project
A
BCDEF
IRR on
overall
Investment
?
11%
11%
13%
19%
15%
A
?
9%
11%
16%
10.5%
B
11%
15%
16%
14%
Compared with Project
с
13%
14%
13%
9%
6%
E
9.50%
Transcribed Image Text:Problem #4 (3/10): Six mutually exclusive projects A, B, C, D, E, and F, are being considered by XYZ. They have been ordered by first costs so that project A has the lowest first cost, project F the largest. Detailed cash flows for Projects A and B are given below. (MARR is 10%) Project A: Initial Cost of $323,120. annual benefit of $50,000 for 15 years Project B: Initial Cost of $494,310. annual benefit of $70,000 for 15 years (a) Based on the cash flows and the MARR of 10%, what is the IRR for Project A? (b) Based on the cash flows, calculate the IRR for the increment from A to B. (c) The table below apply to all projects (A through F). The data can be interpreted as follows: the IRR on the incremental investment from project C to D is 13%.. Which project should be selected? IRR on Increments of Investment Project A BCDEF IRR on overall Investment ? 11% 11% 13% 19% 15% A ? 9% 11% 16% 10.5% B 11% 15% 16% 14% Compared with Project с 13% 14% 13% 9% 6% E 9.50%
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