Question

First cost ($) Annual cost ($) Salvage ($) Life, years A 35,000 21,800 3,000 5 B 65,000 14,000 6,000 5 What is the incremental ROR (i*%) for the above cash flow?

          First cost ($) 
Annual cost ($) 
Salvage ($) 
Life, years
A
35,000
21,800
3,000
5
B
65,000
14,000
6,000
5
What is the incremental ROR (i*%) for the above cash flow?

Added by Jason C.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Syed Vasi

Step 1

For option A: Year 1: -35,000 (first cost) Year 2: -21,800 (annual cost) Year 3: -21,800 (annual cost) Year 4: -21,800 (annual cost) Year 5: -21,800 (annual cost) + 3,000 (salvage) Net cash flow for option A: -35,000 - 21,800 - 21,800 - 21,800 - 21,800 + 3,000 = Show more…

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A First cost ($) 35,000 Annual cost ($) 21,800 Salvage ($) 3,000 Life, years 5 B 65,000 14,000 6,000 5 What is the incremental ROR (i*%) for the above cash flow?