23. The estimated cash flow for each alternative of mutually exclusives
alternative with MARR of 20% are as follows: Use the incremental
analysis of IRR method to make a recommendation.
Alternatives M1 M2 M3
Initial Cost $42,000 82,000 60,000
Annual Benefit $35,000 40,000 48,000
Annual operating cost $23,000 25,000 32,000
Salvage value $8,000 15,000 16,500
Useful Life 8 years 8 years 8 years
Rate of Return 25% 22.50% 23.80%
For M1
for M2
for M3
Answer: M2
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