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A firm is deciding which alternative is the best for them to refurbish their production line. Details of the alternatives is as below: Item Alternative
A firm is deciding which alternative is the best for them to refurbish their production line. Details of the alternatives is as below:
Item | Alternative | ||
A | B | C | |
Installation | RM10,000 | RM15,000 | RM20,000 |
Scrap value | 3,000 | 1,000 | 4,000 |
Net yearly receipts | RM1,625 | RM1,625 | RM1,890 |
Lifetime | 10 years | 20 years | 20 years |
Assume repeatability for Alternative A.
Help the firm to choose the best alternative using Internal Rate of Return (IRR) Method. (Hint: calculate IRR for individual alternative and also for the changes from one alternative to the other).
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