The IRR method is used to evaluate the following two mutually exclusive alternative investments. The MARR is 8% per yearAlternativeRS versus RInitial cost$250,000$400,000$150,000Net Annual Revenues$58,766$80,919$22,153Service life (years)101010IRR19.6%15.4%7.8%Which of investment is more economical and how is it determined from the information given aboveO A. Alternative R because it has a higher IRRB. Alternative S because the incremental IRR is less than MARRC. Alternative S because it has higher initial cost and annual revenuesD. Alternative R because the incremental IRR is less than MARR

Given the MARR of 8 %, and the incremental IRR between S and R is around 7.8 %, therefore we will…

Answered: The IRR method is used to evaluate the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Alternative A has a rate of return of 14% and alternative B has a rate of return of 17%. If the investment required in B is larger than that required for A the rate of return on the increment of investment between A and B is: O Larger than 176 O Between 14% and 1796 O Smaller than 1496 O Larger than 14%
A pipeline engineer working in Yemen for the oil giant BP wants to perform a present worth analysis on alternative pipeline routings the first predominately by land and the second primarily undersea. The undersea route is more expensive initially due to extra corrosion protection and installation costs, but cheaper security and maintenance reduces annual costs. Use present worth analysis with a MARR= 9% to determine which route should be selected Use factors or formulas
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The PW-based relation for the incremental cash flow series to find A/* between the lower first-cost alternative X and alternative Y has been developed. 0=-38,000+9000(P/A,Ai*,10) + (-2000 (P/F,Ai*,10)) Determine the highest MARR value for which Y is preferred over X. Any MARR value less than % favors Y.
The PW-based relation for the incremental cash flow series to find A/* between the lower first-cost alternative X and alternative Y has been developed. 0= -38,000 + 9000 (P/A,Ai *,10) + (-5000(P/F,Ai*,10)) Determine the highest MARR value for which Y is preferred over X. Any MARR value less than % favors Y.
Three different plans were presented to the Ahbhalet Corporation for operating an identity-theft scanning system. Plan A involves renewable 1-year contracts with payments of $1.1 million at the beginning of each year. Plan B is a 2-year contract that requires four payments of $360,000 each, with the first one made now and the other three at 6-month intervals. Plan C is a 3-year contract that entails payment of $3.5 million now and the second payment of $0.5 million 2 years from now. Assuming that the company could renew any of the plans under the same payment conditions, determine which plan is best on the basis of a PW analysis at a MARR of 6% per year compounded semiannually. The present worth of plan A is $ The best plan on the basis of the present worth analysis is plan B the present worth of plan B is $ and the present worth of plan C is $
A cost-saving device has no salvage value after 5 years. Two options: Device A: Costs $10,000 & saves $3000 annually Device B: Costs $13,500 & saves $3000 the 1st year & increases $500 annually Which alternative should be selected using incremental ROR analysis, MARR=7%?
Compare three alternatives on the basis of their capitalized costs at i=9.00% per year and select the best alternative. (Include a minus sign if necessary.) The capitalized cost of alternative E is $ ox, alternative F is $1375347.55, and alternative G is $ The best alternative is
ABC Beverage, LLC, purchases its 355-ml cans in large bulk from Wald-China Can Corporation. The finish on the anodized aluminum surface is produced by mechanical finishing technologies called brushing or bead blasting. Engineers at Wald are switching to more efficient, faster, and cheaper machines to supply ABC. Use the estimates and MARR = 8% per year to select between the two alternatives. Brush Alternative Bead Blasting Alternative P $-400,000 $-400,000 n 6 years large Salvage Value $50,000 no value AOC Nonlabor $-60,000 in year 1, decreasing by $2500 annually starting in year 2 $-70,000 per year
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The following five alternatives that are evaluated by the rate of return method, If the alternatives are independent and the MARR is 15% per year, the onels) to select is (are) Incremental ROR, N. When Compared with Alternative Initial Investment,S Alternative Alternative A BC DE 10.6 27.3 194 353 25.0 -25,000 -35,000 13.1 38.5 24.4 -40,000 13.4 46.5 27.3 26.8 -60,000 25.4 -75,000 20.2 Only D O Only D and E O Only A D, and E O Only E
Three mutually exclusive electric-vehicle battery systems are being investigated by a large automobile manufacturer. Pertinent data are given below: Solve, a. Use the PW method to select the best battery system. The MARR is 15% per year, and the system chosen must provide service for 10 years. Assume repeatability. b. Confirm your recommendation in Part (a) using the IRR method.

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