Consider the following two mutually exclusive alternatives for reclaiming a deteriorating inner-city neighborhood (one of them must be chosen). Notice that the IRR for both alternatives is 27.20%

a. If MARR is 12% per year, which alternative is better?

b. What is the IRR on the incremental cash flow [i.e. (Y-X)] ?

c. If the MARR is 27.5% per year, which alternative is better?

d. What is the simple payback period for each alternative?

e. Which alternative would you recommend?

EOY	X	Y
0	-$95,000	-$95,000
1	$50,000	$0
2	$49,000	$0
3	$52,290	$195,517
IRR	27.20%	27.20%