Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
Problem 24P: Translate the following monetary payoffs into utilities for a decision maker whose utility function...
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Question

Transcribed Image Text:Which alternative should be selected using incremental rate of return
analysis, if MARR = 12.0%?
First cost
Annual
benefit
Life
ROR
Do-nothing
0
10 yrs
A
B
$6,500 $3,500
1,246 765
с
D
$7,500 $5,000
1,523 779
14.0% 17.5% 15.5% 9.0%
B, because its ROR is the highest
something other than C, because C costs the most initially
C because C has the highest annual benefit
C, because the C-B increment has a ROR of 13.70% and the A-B increment has a
ROR of 9.66%
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