13. Beta's benefit/cost (B/C) ratio. B. Problems and Questions 14. Gamma's benefit/cost (B/C) ratio. 15. The incremental B/C ratio between Alpha and Beta. Delta Company is considering the production and sale of new precision 16. The incremental B/C ratio between Alpha and Gamma. equipment. The key parameters of the three types of precision equipment under scrutiny by Delta Company are shown below (Please note that all 17. The best precision equipment based on the benefit-cost ratio. parameter values and equipment names are fictitious) 18. Alpha's Internal Rate of Return (IRR). Parameters Alpha Beta Gamma 1. Initial Cost 19. Gamma's Internal Rate of Return (IRR). ($) 240,000 260,000 295,000 158,000 at 20. The incremental Internal Rate of Return (AIRR) between Beta and EOY1 175,000 at EOY1 175,000 at EOY1 Gamma. 2. Revenues increasing by decreasing by increasing by 1.0% ($) $3,000 0.5% annually annually 21. The best precision equipment based on the IRR method. annually thereafter. thereafter. thereafter 22. Beta's External Rate of Return (ERR). 90,000 at 3. Operating EOY1 122,000 at EOY1 120,000 at EOY1 to 23. Gamma's External Rate of Return (ERR). costs increasing by decreasing by EOY5 inclusively; ($) 1% annually $1,000 annually $110,000 from EOY6 thereafter to EOY10 inclusively. 24. The incremental External Rate of Return (AERR) between Alpha and thereafter Gamma. 4. End-of-life salvage 50,000 40,000 -20,000 25. The incremental External Rate of Return (AERR) between Beta and value ($) Gamma. 5. Useful life (years) 5 10 10 26. The best precision equipment based on the external rate of return (ERR) All parameter values are fictitious. 2 method. . . EOY = End-of-year Industry Standard = 3 years 27. If the company's precision equipment budget is $550,000, which precision MARR = 10% equipment(s) should it purchase assuming that purchases of precision equipment are independent