firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. Installed cost $40,000 $30,000 $20,000 Net annual revenue $6,400 $5,650 $5,250 Salvage value Useful life 20 years 20 years 10 years Calculated IRR 15.0% 18.2% 22.9% EOY 10, alternative IIl would be replaced with another alternative III having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should rrange (rank order) the feasible alternatives to use the incremental IRR procedure. (Hint: DN indicates "do nothing" alternative). Choose the correct answer below. DA. DN, I, II, I OB. DN, II, I, I DC. DN, II, I, II OD. LILIIL DN
firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. Installed cost $40,000 $30,000 $20,000 Net annual revenue $6,400 $5,650 $5,250 Salvage value Useful life 20 years 20 years 10 years Calculated IRR 15.0% 18.2% 22.9% EOY 10, alternative IIl would be replaced with another alternative III having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should rrange (rank order) the feasible alternatives to use the incremental IRR procedure. (Hint: DN indicates "do nothing" alternative). Choose the correct answer below. DA. DN, I, II, I OB. DN, II, I, I DC. DN, II, I, II OD. LILIIL DN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
E1
Transcribed Image Text:A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network.
II
$40,000
$6,400
$30,000
$5,650
$20,000
$5,250
Installed cost
Net annual revenue
Salvage value
Useful life
20 years
20 years
10 years
Calculated IRR
15.0%
18.2%
22.9%
At EOY 10, alternative III would be replaced with another alternative III having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should be chosen? Use the incremental IRR procedure.
Arrange (rank order) the feasible alternatives to use the incremental IRR procedure. (Hint: DN indicates "do nothing" alternative). Choose the correct answer below.
O A. DN, I, II II
O B. DN, II, II, I
O C. DN, II, I, II
O D. I, II, III, DN
Transcribed Image Text:Perform the incremental IRR Analysis. Fill-in the table below. (Round to one decimal place.)
Incremental
Alternative to be
Investment
Inc. IRR
selected
%
Δί
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