Work Problem 6-38 by using the internal rate of return (IRR) method. The MARR is 15% per

Question:

Work Problem 6-38 by using the (IRR) method. The is 15% per year. Remember to think incrementally!

Data from Problem 6-38:

Two mutually exclusive alternatives for office building refrigeration and air conditioning are being investigated. Their relevant costs and lives are summarized as follows:

Absorption Compression Chilling (AC) Chilling (CC) Capital investment $80,000 $60,000 Annual operating 40,000 32,000 exp

If the hurdle rate (MARR) is 15% per year and the study period is 18 years, which chilling system should be recommended?

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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