Question 7.2
The following tables provide information of six mutually exclusive projects and their IRRs derived
from the same service lives of 9 years. Using the method learned in Topic 8, explain the procedure
to conduct the incremental analysis by constructing the necessary tables using the relevant
information provided below. Which alternative should be chosen if the MARR = 10%?
Capital investment
Annual revenues less
expenses:
IRR on total cash flow
A
B
C
D
E
F
$10,000 $12,000 $7,000 $5,000 $3,800 $16,000
2,050 2,450 1,200 752 500 3,050
14.38% 14.27% 9.7% 6.53% 3.52% 12.41%
Increment
considered
?(?-?) ?(?-A) ?(F-B) ?(C-D) ?(D-E) ?(A-D) ?(E-C)
IRRA
24.35% 14% 6% 17% 15% 21% 16%
21