Use incremental analysis to evaluate the 2 alternatives. Assume a seven year life and a MARR of 15%. (IRRS for each is given) Would picking the highest IRR give you the best investment decision? Alt A Alt B Initial $21,000 $16,000 $3,000 $7,500 $8,000 Investment O&M Costs $2000 Annual Benefit $8,000 Salvage Value $5,000 IRR 23.2% 24.8%

Use incremental analysis to evaluate the 2 alternatives. Assume a seven year life and a MARR of 15%. (IRRS for each is given) Would picking the highest IRR give you the best investment decision? Alt A Alt B Initial $21,000 $16,000 $3,000 $7,500 $8,000 Investment O&M Costs $2000 Annual Benefit $8,000 Salvage Value $5,000 IRR 23.2% 24.8%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 21P

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