A company is considering 3 types of equipment for its manufacturing plant. Pertinent data are as follows:

If the minimum attractive ROR is 15%, compare the alternatives based on Incremental Analysis using IRR method. Use 5% and 23% annual rates.

1ST COMPARISON

a. Determine the NPV at 5%.

b. What is the NPV at 23%?

c. Calculate the IRR for this comparison.

2ND COMPARISON

a. Determine the NPV at 5%.

b. What is the NPV at 23%?

c. Calculate the IRR for this comparison.

Which equipment should the company purchase?

TYPE A TYPE B TYPE C First Cost P 200,000 P 300,000 P 270,000 Annual Expenses 32,000 24,000 29,000 50,000 32,000 Operating Cost Labor Cost Insurance and Property Taxes Payroll Taxes 40,000 3% of FC 3% of FC 3% of FC 4% of FC 4% of FC 4% of FC Estimated Life 10 10 10 Market Value 50,000 75,000 75,000