Incremental analysis evaluates the incremental cash flows of one project relative to another one. In the table below, incremental cash flows of project B, as compared to project A, shown in the last column of the table. Project B is preferred over project A if the internal rate of return of the cash flows shown in column (B-A) is

Alternatives (8-year life)

Alternative A Alternative B B A

Initial Outlay -30,000 -45,000 -15,000

Annual Revenues 40,000 50,000 10,000

Annual Expenses 35,000 35,000 0

Select one:

1. Smaller than zero
2. Grater than minimum attractive rate of return
3. Grater than zero
4. Smaller than the minimum attractive rate of return