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MARR of mutually exclusive alternatives

Following are the cash flows and a MARR of five mutually exclusive alternatives (only one can be chosen).

MARR = 14%

Year 0 1 2 3 4 5
Alternative A ($3,000) $500 $750 $1,100 $1,500 $1,200
Alternative B ($5,700) $1,100 $1,500 $2,000 $2,500 $2,150
Alternative C ($1,000) $300 $400 $500 $400 $300
Alternative D ($7,500) $1,800 $2,500 $2,500 $2,500 $1,000
Alternative E ($8,000) $4,000 $2,000 $2,000 $2,000 $1,500

a. Using the Present Worth criterion, which alternative should be accepted?
b. Using the Internal Rate of Return criterion, which alternative should be accepted?

Solution Preview

Following are the figures and calculations:

Project NPV ROR

A 2050 68.3%

B 3550 ...

Solution Summary

This problem examines two alternative investment options, and provides decision criteria for each

$2.19