Which alternative should be selected using incremental rate of returnanalysis, if MARR = 12.0%?First costAnnualbenefitLifeRORDo-nothing010 yrsAB$6,500 $3,5001,246 765сD$7,500 $5,0001,523 77914.0% 17.5% 15.5% 9.0%B, because its ROR is the highestsomething other than C, because C costs the most initiallyC because C has the highest annual benefitC, because the C-B increment has a ROR of 13.70% and the A-B increment has aROR of 9.66%

IRR (Internal Rate of Return)IRR is the discount rate at which the net present value (NPV) of cash…

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Which alternative should be selected using incremental rate of return analysis, if MARR = 12.0%?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

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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